Turned out for me the problem was the temp folder in PHP was the Windows temp folder. The file inherited the permissions for that folder before being copied over to the destination folder in WP. You can either give the IIS group access to the Windows temp folder, or specify a different temp download folder in the php.ini file.
Not sure why noticing the problem coincided with a WP update.
Hope this helps.
I have the exact same problem after the update.
If you find an answer please post back
