Permalinks on IIS5 default works, “pretty” doesn’t

title pretty much says it all, but here is the background
moved wp from a development server (Windows 2003 w IIS6(?)) to a staging server (Windows 2000 IIS5)

on development I have a custom permalink
/index.php/%postname%
works fine
after moving the files to the staging server and testing the links worked fine but if someone entered
server.com/blog/index.php there was an error, so cleared the website setting and res built it in IIS so now
server.com/blog/index.php brings up the blog home page – as expected
server.com/blog/index.php/postid – results in page not found
server.com/blog/index.php/pretty-post-reference – results in page not found
server.com/blog/index.php/pretty-post-reference/postid – results in page not found
server.com/blog/index.php/2008/02/25/pretty-post-reference/postid – results in page not found
but
server.com/blog/?p=32 works

would prefer a “nicer” url

TIA