One reason that can cause that error is you need to use a root folder under ~/App_Data (or a different location than your site folder)

For example, by default FileVista creates a root folder pointing to ~/App_Data/TestRootFolder

 

This is because if you upload anywhere outside App_Data subfolder of your site root, this would cause ASP.NET to recycle application so this may cause a HTTP 500 error. Only App_Data subfolder is allowed to be changed without causing a recycle.