Media missing when permalinks enabled

Running WordPress 2.9.2 on IIS7

When I upload images or documents using the media uploader everything works fine, but when I enable any kind of permalink structure the images don’t display, they’re all giving me a 500 error.

I tried changing the default path to a folder in the root but it didn’t help. I’ve set it back to default

I have no enabled plugins

My current permalink struture is
/%post_id%

And the web.config for this site is

<?xml version="1.0" encoding="UTF-8"?>
<configuration>
  <system.webServer>
    <rewrite>
      <rules>
         <rule name="wordpress" patternSyntax="Wildcard">
          <match url="*"/>
          <conditions>
            <add input="{REQUEST_FILENAME}" matchType="IsFile" negate="true"/>
            <add input="{REQUEST_FILENAME}" matchType="IsDirectory" negate="true"/>
          </conditions>
          <action type="Rewrite" url="index.php/"/>
        </rule>
      </rules>
    </rewrite>
  </system.webServer>
  <system.net>
    <mailSettings>
      <smtp deliveryMethod="SpecifiedPickupDirectory">
        <specifiedPickupDirectory pickupDirectoryLocation="C:\inetpub\mailroot\Pickup"/>
      </smtp>
    </mailSettings>
  </system.net>
</configuration>

Any help much appreciated.