You are not alone with this one.

A work-around is to use the full URL to the file. I know it seems unnecessary, but I can't find any switches in php.ini that would apply.

ie

$fp=fopen("//dev/testweb/test.txt",'w');
fclose($fp);

instead of

$fp=fopen("test.txt",'w');
fclose($fp);

where dev is an IIS 5.0 server on XP with PHP 4.3.6.

I believe this is a bug because the wrappers aren't resolving that path with proper permissions even though I have set them.

Good luck!