In Windows 2000, standard (non-admin) users could create new files in the root of C: drive. Beginning with Windows XP however, this was no longer allowed by default. While it's possible in Windows 7 to change the DACLs and make some other tweaks to allow standard users to do this, there is a very good reason why you shouldn't.
Suppose for example that an attacker compromised the user's computer and created a malicious file named Program.exe in the root of C: drive. If the user later tried to run a program in the Program Files folder but specified the path incorrectly, then Windows could end up running the malicious file instead of the intended program. So in other words, allowing users to write files to the root of C: drive constitutes an elevation of privileges risk.
Bottom line is, don't try to allow standard users to write to the root folder on their machines!
Mitch Tulloch is a seven-time recipient of the Microsoft Most Valuable Professional (MVP) award and widely recognized expert on Windows administration, deployment and virtualization. For more tips by Mitch you can follow him on Twitter or friend him on Facebook.