You need to give permissions for IIS to be able to read and execute the command interpreter ("cmd.exe"). Without it, Gallery won't be able to call external executables (like ImageMagick). Required steps:
1. Open a cmd-prompt with "Start", "Execute", then type "cmd.exe". Hit ENTER.
2. At the prompt, type:
C:\> cacls %COMSPEC% /E /G %COMPUTERNAME%\IUSR_%COMPUTERNAME%:R
This adds the "read" permission to the IIS-user for the cmd.exe.
Close the prompt and then try activating the imagemagick module again. More
Info
e.g.
C:\>cacls %COMSPEC% /E /G %COMPUTERNAME%\IUSR_%COMPUTERNAME%:R
processed file: C:\WINDOWS\system32\cmd.exe
C:\>echo cacls %COMSPEC% /E /G %COMPUTERNAME%\IUSR_%COMPUTERNAME%:R
cacls C:\WINDOWS\system32\cmd.exe /E /G FRANC\IUSR_FRANC:R