Getting Office Web Apps to run on a Domain controller - AppServerHost.exe

I recall we had a similar issue when running document conversion services.

If you’re attempting Word or PowerPoint viewing and you see errors in the event log regarding AppServerHost.exe – you need to enable non-sandboxing.

http://blogs.msdn.com/b/opal/archive/2010/04/25/faq-sharepoint-2010-rtm-installation.aspx

Open SharePoint 2010 Management Shell, then run:

#Enable Word Web App:

$e = Get-SPServiceApplication | where {$_.TypeName.Equals("Word Viewing Service Application")}
$e.WordServerIsSandboxed = $false
$e.WordServerIsSandboxed

#Enable PowerPoint Web App - you need to answer "Y" for each command:

Get-SPPowerPointServiceApplication | Set-SPPowerPointServiceApplication -EnableSandboxedViewing $false
Get-SPPowerPointServiceApplication | Set-SPPowerPointServiceApplication -EnableSandboxedEditing $false

On the server, use Notepad to open c:\windows\system32\inetsrv\config\applicationHost.config.  Add the line below at the end of the dynamicTypes section.
<add mimeType="application/zip" enabled="false" />