The problem only occurs if you choose to compile your VWG app as an exclusive 32-bit app (Project Properties -> Build -> Platform Target). By default this is set to Any CPU and it will run as watever platform the target machine is, without problems.
However, if you have to set it to 32-bit, as I did due to a dependant database dll only being released in 32 bit, and you are installing to a x64 machine, then you hit problems with the IIS application.
By default, when running the new Managed Pipeline in IIS7, all App Pools have the 'Enable 32-Bit Applications' set to false. This option is defined as whether to allow 32-bit apps when running on an x64 machine.
Navigate to the Application Pools option in the left hand TreeView in IIS7, and select your target App Pool (the default managed pipeline one is named 'DefaultAppPool'), and then open the advanced settings. In here is an 'Enable 32-Bit Applications'. Setting this to true should now allow your VWG app to run.