ASPNET Account Lockout with WebService

[binder]

I have a Win 2003 server with IIS 6.
I have a webservice that is trying to copy a file from one local
directory to another local directory on the server.

I'm getting this error when trying to copy the file from the temp dir
to the warehouse path on the IIS 6 server

System.IO.IOException: Logon failure: unknown user name or bad
password.
at System.IO.__Error.WinIOError(Int32 errorCode, String
maybeFullPath)
at System.IO.File.InternalCopy(String sourceFileName, String
destFileName, Boolean overwrite)
at System.IO.FileInfo.CopyTo(String destFileName, Boolean overwrite)
at System.IO.FileInfo.CopyTo(String destFileName)

I'm a little confused about the failure I'm seeing here.

After my initial round of attempts to move a file, the ASPNET machine
account was locked out.

I had to go into the user properties and clear the account lockout.

I found entries in the Security event log that show login attempts
failing for ASPNET user.

That tells me that we are not dealing with a directory permissions
issue since I gave ASPNET full access to my source and target
directories.

It seems like ASPNET machine account is being asked to login when
trying to access the warehouse.

I don't know if it is a password issue or ...?