Wordpress on Windows - Permissions and Database Backup

I have Wordpress installed on Windows, and I have a couple of problems and a couple of questions.

I am having a problem with permissions. The site is on a VPS, so I can set the permissions myself, but I don't know how to do it. I know where to do it, just not who gets what. It is causing a problem with updating or deleting plugins. And because of that, I am afraid to update Wordpress itself, for fear that everything will disappear, like some of the plugins have. It seems that it can't upload any exe file, also won't delete any folder, and maybe more problems. I have tried going thru the file manager on the server, no luck there either.

Next problem is once the permissions are ok, I want to back up the database before I update WP, just in case. My ISP backs it up, but it always says "with errors". The wpmudev backup plugin won't work with the older version of WP that I have. Is there a manual way to do it?

And a question - this blog is in a subfolder of the main site. Will I be able to run multisite from this subfolder?

One more question - the way this was set up (long time ago) my permalinks are site.com/WPsubfolder/index.php/postname. Would it be possible to get rid of the "index.php" now that WP on Windows is more advanced, and if so, would you set up some sort of redirects for it, and how would that work?

Lots of questions and problems, I know, but I need to get this working before I can set up multisite and all these wonderful plugins!