Hi,
Sorry, I did not mean to be cryptic in my first response. In .NET 2, you actually have to look in the top level web.config file to see if the server is forced to be locked down globally. Look for web.config here:
C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\CONFIG
(This determines if an individual app can override the trust level set here, in its own web.config)
<trust level="Medium" originUrl="" />
Anyway, it sounds like you are running in Full Trust if your DMX repository is in C:\DMX and not under the DNN folder structure. In which case, I agree with Peter, it is a networking issue. One point though, is you will need to stick with UNC paths, as a mapped drive will not work for the application pool service account.
If you were to switch to Medium Trust in the future, you would need to take other steps to allow DMX to access files outside of the DNN structure. My personal recommendation is you should be running in Medium Trust, in particular if this web site will be published on the Internet. Although, it does present other challenges.
Rob