The identity of application pool 'Test Pool' is invalid, so the World Wide Web Publishing Service can not create a worker process to serve the application pool. Therefore, the application pool has been disabled.

was actually trying to add a system account to the identity of apppool of crm website but got the error
found the support article to fix this but did not used it.
http://support.microsoft.com/kb/929388

instead of that gone ahead with using network service itself

in the process also read what are these windows accounts


LocalService:
The LocalService account is a predefined local account used by the service control manager. This account is not recognized by the security subsystem, so you cannot specify its name in a call to the LookupAccountName function. It has minimum privileges on the local computer and presents anonymous credentials on the network.


This account can be specified in a call to the CreateService function. Note that this account does not have a password, so any password information that you provide in this call is ignored. While the security subsystem localizes this account name, the SCM does not support localized names. Therefore, you will receive a localized name for this account from the LookupAccountSid function, but the name of the account must be NT AUTHORITY\LocalService when you call CreateService, regardless of the locale, or unexpected results can occur.

NetworkService Account


The NetworkService account is a predefined local account used by the service control manager. This account is not recognized by the security subsystem, so you cannot specify its name in a call to the LookupAccountName function. It has minimum privileges on the local computer and acts as the computer on the network.

This account can be specified in a call to the CreateService function. Note that this account does not have a password, so any password information that you provide in this call is ignored. While the security subsystem localizes this account name, the SCM does not support localized names. Therefore, you will receive a localized name for this account from the LookupAccountSid function, but the name of the account must be NT AUTHORITY\NetworkService when you call CreateService, regardless of the locale, or unexpected results can occur.

A service that runs in the context of the NetworkService account presents the computer's credentials to remote servers. By default, the remote token contains SIDs for the Everyone and Authenticated Users groups. The user SID is created from the SECURITY_NETWORK_SERVICE_RID value.

LocalSystem Account


The LocalSystem account is a predefined local account used by the service control manager. This account is not recognized by the security subsystem, so you cannot specify its name in a call to the LookupAccountName function. It has extensive privileges on the local computer, and acts as the computer on the network. Its token includes the NT AUTHORITY\SYSTEM and BUILTIN\Administrators SIDs; these accounts have access to most system objects. The name of the account in all locales is .\LocalSystem. The name, LocalSystem or ComputerName\LocalSystem can also be used. This account does not have a password. If you specify the LocalSystem account in a call to the CreateService function, any password information you provide is ignored.

A service that runs in the context of the LocalSystem account inherits the security context of the SCM. The user SID is created from the SECURITY_LOCAL_SYSTEM_RID value. The account is not associated with any logged-on user account. This has several implications:

The registry key HKEY_CURRENT_USER is associated with the default user, not the current user. To access another user's profile, impersonate the user, then access HKEY_CURRENT_USER.

The service can open the registry key HKEY_LOCAL_MACHINE\SECURITY.

The service presents the computer's credentials to remote servers.

If the service opens a command window and runs a batch file, the user could hit CTRL+C to terminate the batch file and gain access to a command window with LocalSystem permissions.

The NetworkService account has its own subkey under the HKEY_USERS registry key. Therefore, the HKEY_CURRENT_USER registry key is associated with the NetworkService account.