Why does the ‘Month and Name’ Permalink Format not Work on my new WordPress Site (running on IIS7)?

The type of permalinks you write about are also called “Pretty Permalinks” and are a feature of WordPress that has been designed for the Apache HTTP Server with Mod_Rewrite enabled. Every other server is at first incompatible to this and you should not use those pretty permalinks on those system unless you know what you are doing.

There are replacements for some rewrite rules available for other HTTP Servers like Lighty, NGINX (nginx Compatibility (WordPress Plugin)) or as in you case IIS, which is already somehow supported by WordPress because for a longer time there were two developers taking care of IIS specifically (IIRC it’s the author of Enabling Pretty Permalinks in WordPress : URL Rewrite Module : Installing and Configuring IIS 7 : The Official Microsoft IIS Site).

Please ensure that you’ve checked the right docs about Pretty Permalinks and your specific server.

Alternatively switch to Apache HTTP.