OK, after a few other dead ends I guess I figured it out.

First of all, one running IIS6 must give "FULL CONTROL" rights to a directory where XML file is going to be (I'm not sure which rights are necessary for a directory with photos if they are in a separate from XML file directory). To change rigths use Properties window of that directory in Windows Explorer. The WRITE access setting on that directory set in IIS Manager has no apparent effect.

Now, this means that realistically one should only create/modify galleries only in a secure environment, and then upload read-only galleries to a public server. I don't know how secure is NETWORK SERVICE account is, or any other programs that can use that account.

Then, one must include your DotNetGallery_Files directory included with the "example gallery". Otherwise you will get a blank page with no errors and no idea how come nothing is happening! I believe that I haven't seen anywhere in documentation anything about must having this directory included. I thought that everything was included in the DLL file, and the only things necessary to run the project were: DotNetGallery.dll, DotNetGallery.lic and an optional web.config entry.

I think I should get some special offer for a license purchase