uploaded images don't display in preview or in node

INSTALLATION: Drupal 6.18 on Windows 2008 server with IIS 7; using IMCE 6.x-2.0-beta3 with CKEditor 6.x-1.2

I can upload image files, but they do not display in preview mode or after being saved in a node. Images that are placed in the same folder through Windows file management do display, both in preview and on the page. So this appears to be a file permission issue that we are having trouble solving.

Here is what the database administrator says:

"IIS_IUSRS is the account that is used for anonymous access to the site. It seems to me that ICME files are not getting sufficient permission to be read by the anonymous account. They should inherit whatever permissions were set on the IMAGES folder, but they are not."

FOLDER LEVEL: \sites\default\files\images
IIS_IUSRS has:
traverse folder /excute file
list folder /read data
read attributes
read extended attributes
read permissions

FILE LEVEL
On a file uploaded by IMCE, IIS_IUSRS has:
List folder/read data (and nothing else)

What must we do to get the files uploaded by IMCE to have the proper permissions?