While I'm using pretty permalinks, whenever I upload mew media, I get that awful 500 error until I manually go in and set permissions for each media item, despite everything I've tried. Super annoying!
I changed folder permissions for C://Windows/Temp and also redirected to a different temp upload folder in php.ini and changed permissions for that. And then changed them for wp-content/uploads.
IUSR and IIS_IUSRS both have read/write capabilities in every folder. But whenever I upload media, the permissions of that file are still read-only for IIS_IUSRS. The rule isn't inheriting properly.
...and no, I can't switch to Linux. Trust me, I'd love to, but it's against my company's policy.