When updating the Permalinks setting in WordPress, rather than the usual “Permalinks Setting Updated” message, you may instead get a message saying “You should update your web.config now”.
In my humble opinion this should be changed to give a fraction of useful information, such as:
“Permalink Settings NOT Updated as Web.Config Not Accessible. You should update your web.config now”
This seems to only affect Windows server from what I can see because by default the web.config file isn’t writeable via PHP for additional security. As you can probably guess from my recommended update to the error, the key to resolving this is to make the file writable to the IIS user for your server or if on shared hosted, for your website. This user will generally begin with IUSR_serverName or if you are on a shared hosting platform, IUSR_customerName.
Even on shared hosting platforms such as Plesk, you can update the permissions to files and folders to this user via the web interface.
Plesk Solution (based on Plesk 11.5.30)
Go to Websites & Domains > Virtual Directories > Directory Access Permissions
Click the padlock icon next to Web.Config
Select the IIS Anonymous user (for example “Plesk IIS Anonymous Account (IUSR_acmeltd)” and ensure read, write and modify are selected and click ok.
You should set this back to read only once you have updated the Permalinks setting.