Well, let's start out with the basics and work our way from there. First off, did you know that the mysql library has been deprecated in favor of the [man]MySQLi[/man] library (or even [man]PDO[/man])? My first suggestion would be to make sure you don't want to work on getting MySQLi up and running instead.
If not, and you still want to use the old, deprecated mysql library, then the first thing you should check is if PHP is parsing the php.ini file you think it is. Try making a change, such as switching display_errors from Off to On (since it should never be "On" on a production server...) and then do a phpinfo() - did the value change, or did it stay the same? Don't forget that any time you make a change to the php.ini file, you'll need to restart IIS.