You may come across the following problem using PHP on Microsoft IIS: getting permission denied errors from the move_uploaded_file function even when all the folder permissions seem correct. I had to set the following to get it to work:
1. Write permissions on the the folder through the IIS management console.
2. Write permissions to IUSR_'server' in the folder's security settings.
3. Write permissions to "Domain Users" in the folder's security settings.
The third setting was required because my application itself lives in a secure folder - using authentication (either Basic or Windows Integrated) to identify the users. When the uploads happen IIS seems to be checking that these users have write access to the folder, not just whether the web server (IUSR_'server') has access.
Also, remember to set "Execute Permissions" to "None" in the IIS management console, so that people can't upload a script file and then run it. (Other checks of the uploaded file are recommended as well but 'Execute None' is a good start.)