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Can't see any mention of this in issues (or even via much Googling)--surprising, but then the number of Drupal installs on IIS must be a fairly low percentage. I know I wish mine wasn't!
To be honest, I can't tell if this is an issue with Media:YouTube, File Entity, or Media. The issue is apparently that before writing the YouTube URI to the database, the module first tries to save the URI as a file in the tmp directory. Unfortunately, Windows' filesystem does not allow colons in filenames, so the attempt to touch a file like "youtube://v/sodifu8sfdl" fails.
Error messages are:
The specified file sites/name-of-site/files/temp/test_-1337_-Introduction could not be deleted, because it is not a valid URI. More information is available in the system log.
File youtube://v/sodifu8sfdl could not be copied, because the destination directory is not configured correctly.
[Fake URI used here]
There must be a simple patch to save the file without the protocol, and add the protocol only when writing to the database? Sorry, I just can't see where the relevant code is.
Thanks for any help you can offer!