Permissioning problems on Windows server

Hey everybody. I keep getting this permission denied error (below) every time I attempt to upload an image. Have scoured via Google and rechecked my permissions ad nauseum. The following users have full control of the files in my website root directory, which is running on IIS 6.0.

IIS_WPG (mydomain\IIS_WPG)
Internet Guest Account (mydomain\IUSR_mydomain)

Here is my error:
warning: copy(c:\Inetpub\wwwroot\files) [function.copy]: failed to open stream: Permission denied in c:\Inetpub\wwwroot\includes\file.inc on line 374.

The selected file c:\Inetpub\wwwroot\files could not be copied.

Here is line 374 from File.inc
if (!@copy($source, $dest)) {
drupal_set_message(t('The selected file %file could not be copied.', array('%file' => theme('placeholder', $source))), 'error');
return 0;
}

This is really puzzling, as all of the permissions appear to be correct. Am very much appreciative of any help. Thank you in advance.