Breaking this one out into its own thread...
The original question posted had to do with file system permissions needed to get some modules working.
In my case, working on IIS7 on my local dev machine (Vista) I needed to grant the IUSR account read/write permissions to c:\windows\temp to get GMap and image uploads to work, even though sites/default/files had appropriate permissions. Prior to that I was getting a "file not found" error in my logs when I tried to regenerate GMap markers and "selected file could not be copied" when trying to upload an image. This particular issue was also discussed here and here.
Edited to clarify: The reason these permissions are required is that in php.ini the following are set:
upload_tmp_dir="C:\Windows\Temp"
session.save_path="C:\Windows\Temp"
If your server's php.ini file sets these to somewhere else, that's where you need to give IUSR read/write permissions.

Comments
Thank you! This has been
Thank you! This has been troubling me for days! No, months! I always thought that it was an issue with sites/default/files but I've suspected that it was an issue with another folder. Thanks a lot for this!
still getting errors - unable to upload images
I am having this same issue. It started when we had to create another IIS user for the site to use. I tried this fix and it is still happening.
Another twist on my issue is that when we give the IIS user write permisson on the sites/default/files, the site will not function at all. It locks Drupal up and the site will never load.
Any suggestions/thoughts/help on what might be going on and how to fix?