I ran into a replication error right after configuring the transactional replication. The error started after applying the snapshot and the exact the error message was 'The distribution agent failed to create temporary files in C:\Program Files\Microsoft SQL Server\100\COM directory. System returned errorcode 5.' In this specific configuration I was using the sql server agent account as the distribution agent and the AD account was just a simple domain user. In this case the culprit was that the account being used as distribution agent needed write access to folder and giving that permissions fixed the error. One thing to remember is if this is a clustered sql server you're working with you need to grant write access to the account for all the nodes in the cluster. Here is the link to MS KB article.
HTH,
Bulent
