Sorry Vance, I didn't get back to this until after you've already sorted it yourself. I suspect it was the change of the identity of the AppPool definition that resolved the issue. The rshost process and IIS (well, the AppPool) need to be running in the same address space so that they can both access the same piece of shared memory on the machine.
Thanks for posting back with what yuo did to resolve the issue.
Reg Domaratzki