Peter,
I have discovered what the problem is, when I don't have Fiddler open I am unable to copy/edit documents from my vista machine, however, when Fiddler is open I can do what ever I want to. I am able to open a file in Word or open a folder in Explorer without fiddler, I am just unable to update anyting using WebDAV. I will seend you the fidder session in an email as there are about 10 sessions to look at. I'm not sure why fiddler would allow this but thought you should see this. This is Vista Ultimate with UAC turned off.
Thanks,
-Arick