Hi Mandarb,
I ran into the same issue and it seems that the service account had a corrupt SID.
I managed to fix it by dropping the user and adding the user again and all seemed to be fine. Start by making the user just a member of "Domain Admins" and "IIS_WPG" and see what the Configuration gives you?
If you still get an error, it may be something to do with SQL rights so make the user a member of the SQL Security Groups.
If you could post back and let me know if that solved your issue and at what stage?
Thanks!
Cheers,
Shaun.
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