Webdav Server 2008 r2 – System error 67 has occurred. The network name cannot be found.

Bastard. Bastard. Bastard. Round and round in circles.

But at last I fixed it.

In my case the fix was to change the path to the physical path from using the variable %systemroot%\ to  using simply C:\   – I guess the webdav module doesn’t see system variables…

To do this, right click your website, choose manage website => advanced settings