The main reason in the past IIS 3,4,5, etc for the best practices of it not having iis being on the system drive from a security point of view was it was possible with some exploits to do directory traversing of the site to drill down to the system root and execute stuff from there on a not properly configured server.
Modern versions of IIS 6 onwards and I think even 5. You cannot do this. So the security risk is more minimal. Personally I like to have the website data on a sepearte partition, just in case another exploit occurs
Also it is generally best practice not to have your "data" (and websites I would class as "data" ) on your system drive.