When hosting wordpress on iis 7, the ability to upload images from blog post tools like Live Writer and the ability to automatically update plugins is controlled by the permissions set both within IIS and within the directory structure that IIS accesses. The account that holds the key to the success is the “Users” account, unlike other versions of IIS.
WordPress 3.5 Manual Fix
Below is the manual fix you can apply to be able to get your WordPress 3.5 install working correctly, there are two options that should work.
1) In the file wp-config.php, add the following line before “That’s all, stop editing”
define( 'WP_TEMP_DIR', ABSPATH . 'wp-content/' );
2) In the file /wp-includes/class-http.php comment out lines 144 and 145, which look like the following:
if ( ! is_writable( dirname( $r['filename'] ) ) ) return new WP_Error( 'http_request_failed', __( 'Destination directory for file streaming does not exist or is not writable.' ) );
After applying one of the above fixes you should be able to add/upgrade your plugins and upgrade your themes, and will allow you to use the auto upgrade feature when WordPress version 3.5.1 is released.