Following error is received:

Active Server Pages, ASP 0241 (0x80004005)
The CreateObject of '(null)' caused exception E06D7363.

Here is part of the code causing trouble:
    Set myMail = Server.CreateObject("CDO.Message")
'Send Using Pickup
    myMail.Configuration.Fields.Item _
    ("http://schemas.microsoft.com/cdo/configuration/sendusing")=sendusingPickup

'Pickup Directory
    myMail.Configuration.Fields.Item _
    ("http://schemas.microsoft.com/cdo/configuration/smtpserverpickupdirectory") _
    ="C:\Inetpub\mailroot\Pickup"

    myMail.Configuration.Fields.Update

I am running IIS 5.0 on Windows 2000. I have verified CDOSYS.DLL and its registry entry is present. At other places in the code, other objects (Excel.Application, Scripting.FileSystemObject, ADODB.Connection) are created without any problem.

As a suggestion, have you tried checking the NTFS permissions on your Inetpub\mailroot directory???

Yes, "Everyone" has full permissions on this directory.