Its been time I got a chance to trouble shoot a Reporting Service Problem, and this time it was on Windows 7. Actually I faced this issue once before and I managed to skip trouble shooting that.
Reading the initial "Program incompatible message" on running the setup of SQL 2005 I came to know that its necessary to install SP3 for SQL 2005 to run on Windows 7. I downloaded it and installed successfully.
On opening (my favorite) Reporting service Configuration tool, I observed that the "ASP .Net Service Account" appeared blank and because of that I was not able to change the Application pool to ReportServer (which is created by default)
Reading few blogs I changed the Application Pool to Reportserver (from DefaultAppPool) using IIS-> Advanced Settings
But still the problem of the ASP .Net service account was lingering.
I ran the following command to get the service account appear in the configuration tool.
aspnet_regiis -ga "NT Authority\NetworkService"