I don't know what it takes for IIS, but in Apache, you have to edit the httpd.conf file. This file is what holds the startup configuration for the server. If I were to add server side includes (shtml files), I'd do the following:
Edit the DirectoryIndex line to include index.shtml, like this:
DirectoryIndex index.html index.shtml index.html.var
I would then remove the comments from the following two lines, to enable shtml files to be filtered before processing:
AddType text/html .shtml
AddOutputFilter INCLUDES .shtml
I would then edit this line to append "Includes" on the end:
Options Indexes FollowSymLinks Includes
This is an example of what I'd do under Apache. For you, I'd start reading your IIS configuration file and use Google to see if you can do something similar.