Problems with private WP on IIS share host

I know that I’m probably out on a limb already because I’m running WP on an IIS hosted server. I’ve been able to find fixes for most of the problems but now I’ve got one I can’t figure out.

I am trying to do an install of WP 2.0 that I want to make private, just for me… not the world…

So I install WP without problems, then set the IIS permissions on the installation directory root to disable anonymous access. I am prompted as expected, I can see the site, and login to the site as admin…

But now, I can’t enable or disable plugins… Whatever I enabled/disabled before I changed permissions is now a permanent decision. And if I go to Manage->Files, I get an error about admin-functions.php not having permissions to implode something…

And what’s the most frustrating thing is that if I turn anonymous access back on for the install directory, those problems don’t go away even though I can see the site again without logging in. It’s just useless, and I have to install again.

I don’t have a clue what gets hosed just by changing the IIS permissions and I am hoping someone who knows how the security works can give me a clue…

Otherwise, can someone provide info on one of these:
1) Is there a way to secure the site through PHP alone? Can I make it private without having to mess with IIS permissions?? I know you can password protect a single post… I just want to do it for the whole site…
2) Is it possible to do a WP 2.1 install on the same MYSQL database as you have a WP 2.0 install on? I thought maybe using v2.1 might help somehow but I am not ready to upgrade my other blog using the same database yet.

Thanks very much for any help!!!