That worked like a charm. Thank you very much for the assistance.
Aha – thanks Matt – I will give that a go.
Having just had the same problem upgrading a new 2.8 install to 2.8.1 I found that granting the Internet Guest Account (typically IUSR_computername modify access to the wordpress directory (in the Original post this would be d:\inetpub\thepattysite\blog\) seems to fix this problem.
I would remove these permissions once you are done though.
