To get Clean URLs working on IIS 7, install the new URL rewriter module (x86, x64) and add the following to the system.webServer section of the sites' web.config:
<rewrite>
<rules>
<rule name="Drupal clean URLs" enabled="true">
<match url="^(.*)$" ignoreCase="false" />
<conditions logicalGrouping="MatchAll">
<add input="{REQUEST_FILENAME}" matchType="IsFile" negate="true" />
<add input="{REQUEST_FILENAME}" matchType="IsDirectory" negate="true" />
<add input="{REQUEST_URI}" negate="true" pattern="/favicon.ico" />
</conditions>
<action type="Rewrite" url="index.php?q={R:1}" appendQueryString="true" />
</rule>
</rules>
</rewrite>
You also need to install a hotfix to correct REQUEST_URI behaviour when using PHP via the FastCGI module. See KB954946 for more information. A symptom of this problem is when all form submissions get redirected to the frontpage of the site.