Perhaps these suggestions might help;

1. The httpModules section has moved in IIS 7 from the system.web namespace to system.webserver. Try moving your httpModules section there in your web.config.
2. In Vista, you may want to ensure that your web.config file has the correct NTFS permissions and allow access to the web server's machine account. (typically NetworkService but you can change this in iis)
3. Verify that the cuteWebUI dll has the correct permissions assigned.

I can verify that this control works under IIS 7 without error. I'm using the latest build here (favicon/iphone-icon creator) which is running under IIS 7 on win server 2008.

Regards, Greg [edited by: delamitry at 8:43 AM (GMT -5) on Wed, May 20 2009] Noticed you mentioned classic mode. Try switching to integrated in iis 7 and using suggestion 1 above.