Microsoft.NET\Framework\v2.0.50727\
This is the reason, you are using this code which is for ASP.NET 1.1 and NOT ASP.NET 2.0. There are some significant differences between 1.1 and 2.0 framework that makes this code non-functional.
So if you want to use 2.0, you will have to debug and modify the code accordingly (I haven't had a free moment to post the 2.0 version of this code yet-- actually 2.0 has many things built in that streamline this). Recommend you check out
http://www.asp.net/getstarted/default.aspx?tabid=61
For great video demos on creating a fully usable login and portal site.
Or if you are set on using 1.1, you will have to switch your default framework to 1.1 in IIS msc tool in windows.
Hope this helps