Actually, I was able to get this to work with a PowerBuilder Classic 12.5 .Net Web Service without even changing the application pool. Here's the rub though:
When you reference the file system in a PowerBuilder generated .Net web service, the web service doesn't access the physical location you refer to. Instead, it references a subdirectory underneath the virtual root that the web service was deployed to.
In the sample I created I used c:\temp\ as the directory that the files would get stored in. The files ended up being created in c:\inetpub\wwwroot\webservice_root\file\session\__webservice__\C\temp