I've just had a look at the IIS 5.1 documentation on MSDN, and your interpretation of what is required isn't the same as what I've just read.

http://msdn.microsoft.com/library/default.asp?url=/library/en-us/iisref/html/psdk/asp/serv9i5h.asp

Specifically:

The SSI interpreter (Ssinc.dll) will wait indefinitely for applications returning HSE_STATUS_PENDING unless the ServerSupportFunction is called to finish the session.

So I don't think you want to return HSE_STATUS_PENDING. If you did, another site indicated that the correct value for this is 3. HSE_STATUS_SUCCESS is 1. Your problem sounds like a configuration issue to me, but I do not work with IIS so I really don't know. I've used SSI exec with Apache and never had any problems.