The procedures described on the following URL works like a charm:

http://blogs.msdn.com/b/asgoyal/archive/2012/02/17/moving-iis7-root-to-a-non-system-drive.aspx

http://blogs.iis.net/thomad/archive/2008/02/10/moving-the-iis7-inetpub-directory-to-a-different-drive.aspx