If you have verified that the service runs as "Local System" account, i am 
pretty sure that deleting/renaming the ..\nsr\res\nsrladb directory will 
resolve the issue.

I have had a bunch of problems when (remotely) updating NW 7.5/7.6 clients. 
Don't remember the exact problem any more. However i figured out that NW 
obviously has problems to read/convert the old config files.

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