Hmm.. doubtfully his text file is binary. Also, make sure you use \ or / instead of just a single \ inside double quotes, or PHP will try to escape the next character.
As for the problem, I would advise that you ditch IIS and get Apache. But that's just my (and most of the world's) opinion.
If you still want to use IIS, you just need to give the user permission to read and write to that folder.