Ok, first of; here\'s what I did:
I had a similar error yesterday. For me the problem was that the output of the build was empty in the target folder.
I tried to answer a similar question https://stackoverflow.com/a/9411422/182371:
Check %UserProfile%\AppData\Local\dftmp\IISConfiguratorLogs\IISConfigurator.log file for the error messages. Mode details at https://stackoverflow.com/a/8432621/182371
Make sure that the build output of your project is not empty. You can do this by going to IIS, find the site with the name similar to 'deployment16(6).WindowsAzureProject2.WebApplication3_IN_0', right click --> Explore.... Make sure that this folder is not empty and contains all the files required to start a web project successfully.
As for the Access Denied error:
it could be just an IIS default setting to disable browsing. To resolve that, just navigate to that web site in IIS, find Directory Browsing icon, and press Enable. You will at least see the files inside that directory.
Also try not only 127.0.0.1:81, buta specific document inside that folder, like 127.0.0.1:81/Default.aspx
Take into account the fact that there's sometimes some mess with the ports. You see that in the error message it's port 82, but in your browser it's port 81. So make sure you're using the right port. Or, even better, in your service definition try to use some non-standard port for this to avoid remapping.
I got this exact same error and tried a re-install of IIS and the Azure SDK - nothing worked.
Eventually tracked it down to the "IIS URL Rewrite Module 2". I went to the Control Panel and chose Repair and it resolved it. If you have a section in your web.config then this might be the cause.
Follow step 11 from http://www.microsoft.com/en-us/download/details.aspx?id=35448. Worked for me on Windows 8 with Oct 2012 SDk when upgraded from 2011.
I've met the same issue. In the end, I had to reinstall IIS 7.
I ran into the same error today after uninstalling .NET 4.5/Visual Studio 11 Dev Preview, then installing ASP.NET MVC 4 Beta (this is before Feb 29th when the updated VS 2011 Preview drops).
Since I uninstalled .net 4.5, you just need to do an "aspnet_regiis -i" to ensure the .net framework (4.0) is set up with IIS 7.x this worked for me.
Edit: This will work if you uninstall/then manually install Visual Studio 2012 RTM as well.