Hi Frank -
In my case it was an error on my part with the account running the ArcGIS Server windows service. I used a local account accidentally (by not specifying the domain, it created a local account). Once I changed it to our usual admin Active Directory account, things were good to go. I would recommend that if you have the option - I've had issues with local accounts running AGS before, even when they have been given the correct rights on the necessary directories.
You'd still need to check on the privileges for the AD account though.