Here's what I think;
you must put the IIRF.ini in the top-level directory of the IIS application or IIS web site.
If you have drupal in a lower level directory, then you can modify the rules in the IIRF.ini to apply to only URL requests for that particular directory.
Example: this rule applies to all incoming URL requests:
RewriteRule ^/(?!index.php)(.+)$ /index.php?p1=$1
On the other hand, this rule applies to incoming URL requests with a particular URL path
RewriteRule ^/drupal/(?!index.php)(.+)$ /drupal/index.php?p1=$1