Windows 2008 Server + IIS7 Users who receive this error:
I receieved this error plenty of times when trying to upload files or use ImageCache module to create thumbnails which showed up as red X's instead of pictures.
Go to your drupal site > Site Configuration > File System >
Your Temporary Path might be: C:\Windows\temp or something similar
If you receive the "file could not be copied" error, it is likely your permissions are not allowing a write to that file.
* TO FIX THIS ERROR *
1. Create a 'temp' folder in your drupal/sites/default/files/ directory