Under 4.0.6 of PHP, use an absolute path to the font file without referencing the drive. Try the following:
<?php
Header ("Content-type: image/gif");
$im = imagecreate (400, 30);
$black = ImageColorAllocate ($im, 0, 0, 0);
$white = ImageColorAllocate ($im, 255, 255, 255);
ImageTTFText ($im, 20, 0, 10, 24, $white, "/winnt/fonts/arial.ttf",
"This should work.");
ImagePNG ($im);
ImageDestroy ($im);
?>