You could also try this.
In IIS manager
- Go to Application pools and choose the one used by your WordPress Blog.
- Right Click and choose Advanced Settings…
- Change the Identity to LocalSystem
- Click OK to save changes.
Then on Sites,
- Choose your WordPress Blog from the sites list
- Right Click on it and click on Edit permissions
- Go to security tab and click on Edit… (Group or user names)
- Click on add and type “Authenticated users“
- Click on Check Names to validate the username
- Click OK to save changes.
With that, WP should update without the need of using FTP.
Basically you just give read/write permission to an authenticated user… WP is running as a LocalSystem User.
To learn more about ftp configuration you can go to this Microsoft article.
http://technet.microsoft.com/en-us/library/cc771012(v=ws.10).aspx
Also, here there is a blog post showing how to install/configure FTP server…
If you are not able to set it up, you can also install another ftp server.. Ie: Filezilla FTP server, you can get it free from here http://filezilla-project.org/download.php?type=server
You can read more about IIS configuration at http://www.iis.net/learn/manage