Update manager fails

Hi,

I've spent several nights trying to solve this but getting nowhere.

When I try to update an installed module using the update manager, it downloads the update but when it comes to applying the new files, I get the following error:
•Error installing / updating
•File Transfer failed, reason: Cannot remove directory /Website/[www.mywebsite.com]//Website/modules/[module]\..

I've tried with several modules - same issue. If I manually delete the folder during the process, then the update works fine.
The folders have full permissions for IUSR and IIS_IUSRS.

One thought I had is that it might be a file locking issue? Rationale being that one of the module folders (captcha) I cannot delete manually while the server is running.

I am running IIS7.0 on SBS2008, and Drupal 7.17.

Any advice welcome. Thanks.