Software Engineering Institute

IIS contains a technology called ISAPI (Internet Services Application Programming Interface) which is designed to allow programmers to write custom applications which run on IIS. One ISAPI extension uses .HTR scripts to provide a password management interface via IIS. The .HTR ISAPI extension is implemented in the file ISM.DLL. When IIS receives a request for a file ending in .HTR it performs some pre-processing of the request then passes it off to ISM.DLL. If a malicious user crafts an HTTP request for an existing non-.HTR file and appends a large number of "%20" characters and "+.HTR" to the request, ISM.DLL strips out the spaces in the file name and processes the requested file as if it were an .HTR file. Note that "%20" is a unicode representation of the character " " (space). If the requested file is not an .HTR file then the contents of the file will be returned to the requestor, with the exception of text enclosed in script delimiters "<% %>".

Microsoft Knowledge Base article Q260069 states:
The problem occurs because the CreateFile function that is used to open requested files deletes all of the trailing spaces in a file name. The file-name truncation in the CreateFile function causes the two names "C:\Ineptub\Wwroot\Default.asp" and "C:\Ineptub\Wwroot\Default.asp<followed by several blank spaces>" to be the same, which causes the source code of the Default.asp file to be opened and be returned.
In order for this vulnerability to be exploited, specific locations in memory must contain zeros. Memory is zeroed as part of the initialization process, so the server would be most vulnerable soon after the IIS service was started and possibly up to the point at which the .HTR ISAPI code was first loaded into memory. Once the .HTR ISAPI code has been loaded and memory has been "dirtied," the chances that an exploit attempt will succeed are notably reduced.

The contents of files may be disclosed to unauthorized remote users. Target files may be CGI scripts that contain sensitive configuration information such as database access credentials. This specific vulnerability does not allow an attacker to access files located outside the root directory of the web server.

Disable .HTR script mapping if not needed, as described in Microsoft Security Bulletin MS01-004:
1.\tOpen the Internet Services Manager
2.\tRight-click the web server, then choose Properties, then Master Properties, then WWW Service.
3.\tChoose Edit, then HomeDirectory, then Configuration
4.\tRemove the .HTR entry
It’s worth noting that, in addition to .HTR, Microsoft also recommends removing several other so-called script mappings.

Apply the appropriate vendor patch:
IIS 4.0: http://www.microsoft.com/Downloads/Release.asp?ReleaseID=27492
IIS 5.0: http://www.microsoft.com/Downloads/Release.asp?ReleaseID=27491
Note that these are the most recent patches as referenced in MS01-004.

CERT/CC also recommends the following documents on the secure configuration of Windows NT/2000 and IIS:
Windows NT Configuration Guidelines
Windows NT Security and Configuration Resources
IIS 4.0 Security Checklist
Secure Internet Information Services 5 Checklist

It may be possible to use an application layer filter to detect and block malicious requests.