When installing Drupal version 4.7 and later on Windows servers running IIS rather than Apache, PHP must be run in ISAPI rather than CGI mode.
A relatively obscure bug in IIS(5.5) discards PHP session information when the PHP script that sets the session also redirects to another page. In Drupal 4.7 and later, the user login screen automatically redirects to the home page on a successful login. The IIS bug is triggered, preventing the new session data from being sent to the user's browser, and making it impossible for users to log in.
As the bug only affects IIS when PHP is running in CGI mode, switching to ISAPI mode will solve the problem.
Note: IIS(6.x) looks like it does work, apart of some MySQL permissions errors to clean up (LOCK tables specifically). If it doesn't work then you may have to switch
to ISAPI mode.