If you install Magento on Windows Server you can face to usual problem with directory permission.

I set r/w permission to many var directories as suggested within the documentation but after a while during a file upload I always get an annoying error message.
I checked among lines of code and I saw a weird change of current directory in the File.php ( chdir($this->_iwd); ). That variable points the upper directory of to the installation directory. Just set the read permission on that directory and all work fine.

bye marco