We recently had a customer who had Windows Hosting with IIS and she had two WordPress blogs hosted on two subdirectories on the same hosting space. Windows hosting should be the last thing that should come to your mind when you want to do WordPress hosting as it will never come close to LAMP (Linux, Apache, MySQL, PHP) functionalities. Now the problem was that she could not set up Permalinks on both blogs. There was an already published solution on how to setup Permalinks in Wordpress on IIS but we had to tweak that a little to get it working in this scenario.