I am facing similar stuff with my Server:
Server 2008 / IIS7 / URL Rewriter
PHP / mySQL and as application Magento (Shopsystem)
Everything is running fine when I am on the server console using the full qualified name for that application for example http://blahblahblah.domainName.com , but when I try the same from outside, NOT everything works as desired....because:
404 errors should be redirected to the index.php in the root, but this works only as described when I am working on a console on the server.
My Guess is that this has to do with the rights, as I have diffrent rights when I am directly on the console of the server, but I am just guessing.. any Ideas around?
PARTLY SOLVED:
I went into the IIS7 and opened the 404 Error handlers and hardcoded the path to the index.php in the root of my web. This made the trick, even tho i still dont know, why it worked on the console without this change.
The Magento is now up and running fine with all features and pages working.
In the mean time I have also understood that the Magento rewrite rules are just there to prevent access to some directories, because they have read write permissions for the IUSR_xxxxx
Best wishes
Tango