I'm new to WordPress (about an hour now) but very experienced in Windows, and IIS. I believe strongly in giving back and open-source.
First - Auto update fails due to permissions. (See this http://wordpress.org/support/topic/windows-iis-permissions)
The fix is to temporarily grant full permission to the entire wordpress folder tree for IUSR, IIS_IUSRS, and Network Service. The keyword here is temporarily. This allows the PHP script to write files and make changes.
Second - Once the update happens it will brick the server with a 500 error. If you go to c:\windows\temp\php53_errors.txt you can see the offending PHP errors. In my case I had this line: [21-Aug-2013 23:58:13 UTC] PHP Fatal error: Cannot redeclare _wp_post_revision_fields() (previously declared in E:\Webroot\nanohawk\wordpress\wp-includes\post.php:4875) in E:\Webroot\nanohawk\wordpress\wp-includes\revision.php on line 59
My fix was to comment out the offending function _wp_post_revision_fields which resolved the IIS500 error.
You can then load the "upgrade database" page and complete the upgrade.
Remember to reset the IIS permissions so that spam fairies do not visit your site and have alot of fun. IIS Permissions should be set using the basic permissions. (In Win 2008R2 there is a basic and advanced permissions tab). The fastest way to transform full permissions is to uncheck (revoke) the Write permission. This leaves you with Read/Execute/List contents. That also has the special right of read permissons.
I hope this helps others.
A quick note about my installation:
I'm hosting in Microsoft's Azure platform on Windows 2008R2 using an extra-small instance for testing/eval. I have MySQL locally on the box and using the Web Platform Installer v3.0 (http://codex.wordpress.org/Installing_on_Microsoft_IIS).
The extra-small instance is $15/mo and unlike the website service, I'm renting a server instance so I have more control and don't need to rent a database from clearDB.