You have to remember that with Windows Server, the IUSR_ account is used for authentication in IIS. Windows needs a user account when assessing NTFS permissions on files and folders.
Before running setup, right click on the ost-config.php file, click the "Security" tab and add the IUSR account. Give IUSR "Modify" rights, click OK and close all the windows. Run your setup.
If setup completes sucessfully, go back to ost-config.php and uncheck "Modify" and "write" permissions. IUSR should have "Read &Execute" and "Read" NTFS permissions ONLY in a production environment.
Typically I will set the following NTFS permissions on a root web folder; which will then set the proper permissions on the child files and folders:
System: Full Control
Administrators: Full Control
IUSR: Read & Execute, Read
Domain Users (if a domain member server): Read & Execute, Read
Users (if a stand-alone, non-domain server): Read & Execute, Read
Let me know if that helps.