First thing you need to do is to make sure that IIS’s security is not going to be blocking your calls to the BTSHTTPReceive.dll. To do this goto your IIS manager and click on the Web Service Extension node and right click it and ‘Add a new Web Service Extension’. Now browse to the location of BTSHTTPReceive.dll (by default installation its in <drive>:\Program Files\Microsoft BizTalk Server 2006\HttpReceive\ folder). Also remember to check the ‘Set extension status to Allowed’ checkbox. It is also a good idea to create a new application pool for your application to run in. When creating one make sure that the user account used is a member of the BizTalk Isolated Hosts group and the IIS_WPG group.
Now your going to create a new virtual directory in IIS under Default Web Site. Make sure you link the location of BTSHTTPReceive.dll in the content directory. Also make sure you use the new application pool you just setup. Make sure that both Read and Execute permissions are selected, and that Execute permissions are set to Scripts and Executables. After this you should be all set to start setting up your HTTP Receive Location within BizTalk Explorer. Enjoy.