Error sending DAV request. HTTP code 500, status 'Internal Server Error'

Situation:

After installing SCCM 2012 in my LAB, I am able to deploy applications using normal deployment method. But when I choose Software center to install application, the application stuck at ‘downloading information’ stage. I have waited few hours but no difference.

I have started looking into the logs and found an error msg in DataTransferService.log  and it shows the following error. 
Successfully sent location services HTTP failure message.

Error sending DAV request. HTTP code 500, status 'Internal Server Error'

GetDirectoryList_HTTP('http://WIN2008.SCCM2012.LAB:80/SMS_DP_SMSPKG$/LAB0000C') failed with code 0x87d0027e.    DataTransferService  7/8/2013 8:51:36 PM  3028 (0x0BD4)

Error retrieving manifest (0x87d0027e).  Will attempt retry 1 in 30 seconds.     DataTransferService 7/8/2013 8:51:36 PM    3028 (0x0BD4)

The error message ironically tells you there is a problem with IIS and it also tells you that there is an error retrieving manifest in other words content on the share.

So, I have opened up the advanced settings of SMS_DP_SMSPKG$ in IIS by going IIS -> Sites -> Default web site -> SMS_DP_SMSPKG$ -> Manage Application -> Advanced Settings

Once I opened the advanced settings, I have noticed that the physical path for SCCMContentLib is wrong. I have changed the DP storage location from one drive to other drive after the initial setup. Somehow SCCM ContentLib path not updated in IIS,

So I have updated the correct path then restarted the IIS manager then refreshed the software center on the client machine.

Instantly the status message changed from downloading information to "downloading progress" then "Installing".