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So I solved this problem.
I don't know exactly what was wrong.
The way I solved it was by copying the working production web.config, and then making the changes to run the stage and localhost environment. This was a guess, and in this case it worked.
Hi,
When I run the CMS, I am not seeing items in the ajax tree. When looking at the JavaScript console, I see a long string of 500 errors. These are some of them. Any idea of what is going on and how to fix it?
http://localhost:59458/EPiServer/Shell/8.5.1.0/ClientResources/EPi/shell/ui/nls/en-us/episerver.shared.js
http://localhost:59458/EPiServer/CMS/8.5.1.0/ClientResources/epi-cms/nls/en-us/episerver.cms.js
http://localhost:59458/EPiServer/CMS/8.5.1.0/ClientResources/epi-cms/nls/en-us/contenttypes.js