Issue:
You upload images successfully to WordPress and can view the resized thumbnails. But when you try to access the original (full size) image, you receive an HTTP 550 error, which is a permissions error.
This occurs with the following configuration:
WordPress 2.8.x
IIS 7.0 with URL Rewrite Module
Quick fix:
Enable read permissions on the c:\windows\temp directory for the IUSR account and IIS_IUSRS group. Why? Because those accounts don’t have privileges on the temporary upload folder. And when WP goes to copy from the temp directory to upload, it cannot assign the permissions.
Navigate to the folder, right click and select Permissions. Add the account and groups listed above and provide Read access. Save your settings.
You will have to delete the images previously and re-upload, or you can reassign permissions at the wp-upload folder level for the accounts in question and let that propagate to the child folders below.
