Anybody can provide me the best practices to be followed in deployment of asp.net web application & WCF service in IIS 7 regarding the IIS 7 configuration settings , Security setting, application access level settings..

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Does this help? IIS Security. Where possible you should only install / enable the IIS features that you intend to use.

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It depends on your situation.

I always publish my solution to a folder, zip it, ftp it to my server. On the server (using RemoteDesktop) i backup the running version (makes me feel safe & secure) and delete all the files, except web.config. I unzip the file i sent and copy all the files, except web.config. If i made changes to web.config i adjust it manually.

This works for me because i have a shitty internet connection. If it were faster i'd do it differently.