As with others on this forum, I had a devil of a time getting math notation filters working under Moodle. I run installations with Server 2003 and Windows XP running both EasyPhp and XAMPP installations from the Moodle Download site. In all cases, there were permission problems with the mimetex.exe file.
I found the easiest fix was to download a fresh copy from http://download.moodle.org/mimetex/windows/mimetex.exe and replace the copy in the moodle\filter\tex folder. This sets up appropriate permission to be able to execute the file and now all works fine.
I did not find a need to install Pearl as was mentioned elsewhere in this forum. If you are running IIS rather than Apache under Server 2003, it seems like you may need to alter permissions on at least the cmd.exe file. See elsewhere in this forum for help on that if needed.