I have a solution!!! This should help EVERYONE with an issue. I couldn't find any posts about this the other day, my brain must have been in vacation mode.
The basis of my analysis stems from this posting
http://forums.ext.net/showthread.php?570#post2834 and I had some issues with IIS7 Integrated, mainly after doing a couple of suggestions I could get my screens to load up in Coolite now, however I kept getting this Window popup error message saying Coolite is not configured properly with some section of the Web.config - after you see my post could you modify this error saying "In Classic ASP.NET mode do this" and "Using IIS7 Integrated mode do this Web.config"
Here are the modifications to Web.config for Classic ASP.NET mode:
<system.web>
<trust level="Full"/>
<httpHandlers>
<add path="*/coolite.axd" verb="*" type="Coolite.Ext.Web.ResourceManager"
validate="false" />
</httpHandlers>
<httpModules>
<add name="AjaxRequestModule" type="Coolite.Ext.Web.AjaxRequestModule, Coolite.Ext.Web" />
</httpModules>
</system.web>
And now for IIS7 Integrated mode your Web.config changes:
<system.webServer>
<validation validateIntegratedModeConfiguration="false"/>
<modules>
<add name="AjaxRequestModule" type="Coolite.Ext.Web.AjaxRequestModule, Coolite.Ext.Web" />
</modules>
<handlers>
<add path="*/coolite.axd" verb="*" type="Coolite.Ext.Web.ResourceManager" name="Coolite.Ext.Web.ResourceManager" />
</handlers>
</system.webServer>
This should help anyone with using IIS7 in either configuration mode. It might be helpful to developers by updating the Coolite popup Window "missing the required AjaxRequestModule" Warning message for both Classic ASP.NET mode and Integrated mode.
It took me a while to figure out that copying "AjaxRequestModule" section of Web.config to <system.webServer><modules></modules></system.webServer> like it is under <system.web><httpModules></httpModules></system.web> would fix that error for IIS7 Integrated.