I can confirm that PHP 4.0.6, MS-SQL7 and the MS-SQL module all work under IIS 5.1 and Windows XP Pro....
So this also answers the above question - Use IIS5.1 - it comes with Windows XP anyway and IMHO is easier to use than apache (having a GUI interface etc).
As I test more part of PHP/Win XP I will post the results up here