OK, Finally got rid of the error after several attempts at modifying permissions and running apache as a separate user with all required privileges with no avail, by creating a profile folder for Desktop under
C:\Windows\SysWOW64\config\systemprofile\Desktop
Found this solutions in msdn forum http://social.msdn.microsoft.com/Forums/en-US/innovateonoffice/thread/b81a3c4e-62db-488b-af06-44421818ef91?prof=required Hope this will help someone using these modules in future