Chris,
After posting my last reply, I immediately remembered the answer: I had to set permissions under the FTP site in IIS. This seems to be independent (or maybe on top of) the security permissions set in the file system.
There are similar settings in IIS for web sites. I haven't setup a web site yet, so I am not familiar with all the details and security ramifications involved there, but I would guess yours is a similar issue.
Hope this helps,
...Jim
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