You normally don't have write permissions problems on windows ... but, you may need to allow iis_webuser ( or whatever it's called .. been a few years ), to the group that can write to the folders

Can you upload images (via b2evo) and see the full size image?

¥

I suspect it is not really a permissions issue, partly because "Everyone" has full access to the entire directory tree (pretty much like a 777), and partly because we are just trying to read the file, not write to the directory. And the file "reads" (displays) perfectly when you click on the placeholder, so the file itself does not seem to be an issue. This happens even with the included Monument Valley pics that came with the application.
Is that what you meant by "upload[ing] images... to see the full image"? Or did I misunderstand your question?

To see an example, please go to http://www.warehousefulfillment.net/blog1.php
and note the placeholder instead of a thumbnail. This placeholder is in fact the b2evolution logo that came with the installation package, and if you click on it you can see the full size image.

The thumbnail URL is http://www.warehousefulfillment.net/htsrv/getfile.php/b2evolution8.png?root=shared_0&path=logos/b2evolution8.png&mtime=1222178208&size=fit-400x320.

The error on the page means you don't have the GD library (PHP extension) installed, which is used by b2evolution to resize images.

Thank you, that fixed the problem!