Recently I encountered an exception related to System.Security.Permissions.FileIOPermission while trying to send email from ASP.NET (dasBlog actually). This has nothing to do with rights set on folders! It is a trust (code access permission) issue, and it will happen if your application is running under Medium Trust. Elevating the trust level will definitly help. From what I've read, defaulting to the system defined SMTP settings (i.e. removing any SMTP settings form web.config) will also work, but I have not tried this yet.