Well this one took a while to track down!!
I’ve been looking at a problem with 2008 where after enabling compression in IIS – javascript and css files still weren’t getting compressed. Enabling Failed Request Tracking showed “UNKNOWN_ERROR” when trying to compress the files(helpful!).
After two days of searching – I eventually found another reference to the problem (along with a fix) here:
Turns out that as a result of hardening the server – permissions to the C: root had changed – and there’s a call to GetVolumeInformation which fails due to this.