For better or worse, I run my vCO Client from the vCenter Server in my lab, up till today, that wasn’t an issue either. That is, after upgrading to vCenter 5.0 U1 I was presented with:
“You may not have the appropriate permissions.” – What? Ok… let’s browse to the directory:
Even after clicking “Continue” here, I had no luck.
Fix
The only fix I have for this at the moment, is to uninstall and reinstall vCO on the vCenter server.
Have you tried turning off UAC?
The user I was using was a domain admin. With the help of the vCO group, I’ve found that you are able to change ownership of the folder, and propagate the new permissions down. They are currently looking into what about the upgrade causes this. As I know more, you’ll know more.