Error: Unable to generate a temporary class (result=1) ... When Invoking Methods on a Web Service

First, credit where credit is due. The OP solved this problem and answers it in the comments section of the question. However, I understand that many people come to StackOverflow and will read through the question, and not look at the comments. Therefore, I'm relaying the above answer here. Be sure to up-vote the question if this is useful.

This problem occurs because the account that is associated with your web service's application pool in IIS does not have read/write permission to the C:\Windows\Temp folder. I have no clue why the account needs access to this folder, but it does. From my casual observation it looks like it just writes an empty file with a random name to the Temp folder.

To solve this problem browse to the C:\Windows folder, and right-click on the Temp folder. Select Properties, and on the Security tab add the account associated with your web services application pool. Hit the OK button, go to IIS and recycle your application pool. This should fix your web service request.

It is worth noting that the circumstances around this error can be a bit deceptive. I've ran into this problem a couple times over 5 years. (I've forgotten about it each time.) The reason why it's not so noticeable is because you can publish a web service, successfully browse to the associated asmx page and see the outline of your web service methods. Furthermore, your Visual Studio project can add a reference to the Web Service and Visual Studio will auto-generate all associated classes for the web service in your VS project.

This gives the impression that everything is working properly until you make your first request to execute a method on the web service. The web service will fail when it begins executing code because it wants access to the temp directory.

Further information regarding this bug can be found at the acknowledged bug report at Microsoft.com.

That happens when your web site doesn't work with Application Pool "DefaultAppPool" and you chose its own pool.In that case you need to add an user with the name of your pool.