Server Application Unavailable is not a very specific error. Here are a few solutions:
1. Check your event logs for errors such as these after failing to login(these errors may not occur if ASP is configured correctly, but does not have the correct permissions), these errors may not show in Win2003:

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APPLICATION LOG:

Event Type: Warning
Event Source: W3SVC
Event Category: None
Event ID: 36
Date: 1/15/2004
Time: 10:51:24 AM
User: N/A
Computer: MAIL
Description:
The server failed to load application '/LM/W3SVC/3/Root'. The error was 'The server process could not be started because the configured identity is incorrect. Check the username and password.

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SYSTEM LOG:

Event Type: Error
Event Source: ASP.NET 1.1.4322.0
Event Category: None
Event ID: 1084
Date: 1/15/2004
Time: 4:34:26 PM
User: N/A
Computer: MAIL
Description:
aspnet_wp.exe could not be started. The error code for the failure is 80004005. This error can be caused when the worker process account has insufficient rights to read the .NET Framework files. Please ensure that the .NET Framework is correctly installed and that the ACLs on the installation directory allow access to the configured account.

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SYSTEM LOG:

Event Type: Error
Event Source: ASP.NET 1.1.4322.0
Event Category: None
Event ID: 1007
Date: 1/15/2004
Time: 4:34:26 PM
User: N/A
Computer: MAIL
Description:
aspnet_wp.exe could not be launched because the username and/or password supplied in the processModel section of the config file are invalid.

Solution:
1. Go to Administrative Tools\Computer Management.
2. Expand Local Users and Groups.
3. Click on the Users folder.
4. The ASPNET user is locked out (disabled) - It has a red circle with white 'x' on it.
5. Double click on the account and UNCHECK 'Account is disabled'
6. Make sure the ASP.NET user has Read & Execute, List Folder Contents and Read checked in the Security of the folder WebAdmin is installed.

2.

a. Explore to the directory you have WebAdmin installed. Make sure the ASPNET and IUSR accounts are added and have FULL CONTROL. Make sure you click the advanced button under the securities tab and check the option "Replacepermission entries on all child objects...". If you try to add ASPNET and that user does not even exist on the machine, please refer to the instructions below:

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I installed .NET before installing IIS and now my ASPNET user does not exist? - HOWTO: Repair IIS Mapping After You Remove and Reinstall IIS

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b. After completing the previous step, go ahead and try to access WebAdmin again. There is a possibility that you may have an error like this now:

Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.

Description: An unhandled exception occurred during the execution of the current web request. Please review the stack trace for more information about the error and where it originated in the code.

Exception Details: System.Data.SqlClient.SqlException: Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.

c. The wrong user is trying to access WebAdmin. You need to setup a new sql user and password to login to WebAdmin. Please follow the instructions in the following kb article:
http://www.smartmax.com/support/index.php?x=&mod_id=2&root=13&id=91

d. Explore to the WebAdmin folder. Right click, select Properties and go the the Security Tab.
e. Add the NETWORK SERVICE user, give them FULL CONTROL and propogate the security to all child objects. This gives you the proper access to the config.aspx file that is needed to edit and update WebAdmin.
f. Open IIS, click the WebAdmin folder, right click on config.aspx and 'Browse'. Config.aspx should load at this point. You will need to enter the new sql user and password in the SQL Authentication settings. Click OK to save settings.
g. Now you can REMOVE the Network Service user from having control of the WebAdmin folder. Basically, undo step e. above.
h. Try to load WebAdmin.

I installed .NET before installing IIS and now WebAdmin is trying to login under a different user other than the ASPNET user. This is a result of the ASPNET user NOT being created because .NET was installed before IIS.

Please refer to http://support.microsoft.com/default.aspx?scid=kb;en-us;306005&Product=aspnet for more information.