Well, I have heard a number of problems related to this kind of deployment. If Ajax requests aren't working, are you other page requests working (other than home)?
My understanding is that you need to get .NET fully registered on the box and configure IIS in a gentle, convincing, friendly way. Said another way: it's not friendly.
Here's a
Stack Overflow[
^] question that deals with the issue.
Can I just throw this out there as a side note? IIS 5 is 10+ years old...is this a commercial app? A new version of W2k8 is free with BizSpark or DreakSpark or WebSpark. Why not give one of those programs a try?
At any rate, hope this helps some.
Cheers.