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If you are using Windows XP, setting NTFS permissions as I have stated above requires a couple of steps.
Open Windows Explorer. Go to Tools|Folder Options. Now click the View Tab. Uncheck Simple File Sharing which is the last option.
Now go back to your XOOPS directory. Right click on Mainfile.php. Go to Properties. Now click the Security Tab. You will have to add the IUSR_MachineName (MachineName being the name of your computer) and give that account Modify permissions ---- this will get rid of the error all you guys are running into.
If you are still running into issues, I suggest you visit my site & there is a Install XOOPS on IIS guide listed on the homepage.