You could also try just removing the handler mapping via the IIS 7 interface instead of using your web.config.
As far as the config files you've posted, not really sure what website your trying to modify here but you have a few different location elements in your applicationhost.config. It looks like your have the default override for the handlers section to be allowed, so it must be explicitly set to deny somewhere. I saw you have to location elements for the "default web site" path and one is set to overidemode="deny", not sure if thats causing conflicts or not.
<location path="Default Web Site" overrideMode="Deny">
What you could do if your not really worried about security is add the override to the base location. The location element without a path assigned to it. Basically the location element is just letting you group items together and specify what level the items are affecting. The base level would be the whole IIS server, setting a path to "BobSite" would modify the site named "BobSite" and "BobSite/ApplicationBob" would modify the ApplicationBob application starting point within BobSite.
Hope that kind of clears things up. Read that article I gave you it will explain it a little more clearly.
If your basically shooting in the dark at this point you can just use process of elimination or add the overridemode="allow" to all the location elements.