BITS Upload problem

Hi,

I have a client server application that uploads files using BITS.
In the client side I have a service running under LocalSystem account (local
machine system) and the service is uploading the file to a specific folder on
the server.

On the server I set an ACL permission on the upload folder that will alow
only the specific machine Localsystem (<Domain name>\MachineName$) to change
the files on the folder.

BUT, the upload fails.
In the IIS logs I can see that the request from the client is made by
anonymous user, but the IIS security flag: anonymous access is set to off.

When I try to run the service with a specific user and change the ACL on the
destination directory the upload succeeds.

The BITS documentation states clearly that it is possible to submit upload
jobs using the LocalSystem account. Furthermore, the LocalSystem account has
the network credentials <Domain name>\MachineName$. This implies that I
should be able to set permissions to allow upload only from a certain machine
using that machines LocalSystem account.

Any ideas why this is not working?
Am I missing something?

Shai.