Sorry, didn't see the full message. The error you getting is IIS related. Your running YAF in a virtual directory, which is fine, but you need to configure YAF as though it was in a "physical" sub-directory. The problem is in your web.config file, but not where the error is pointing to. If that helps at all.
Depending upon the server, configuring virtual directories can be tricky. Most causes for this error are "ApplicationName" entries not matching.
As far as changing default.config to web.config, whatever gets it working! My advise is get it running localy first. Then move it to the server. Your almost sure it's configuration problems then.
.....the man in black fled across the desert..........and the gunslinger followed.....