This works for me:

$S = IO::Socket::INET->new(
   PeerAddr => "some.unreachable.ip:80",
   Proto => "tcp",
   Timeout => 1) or die "Couldn't connect: " . ($! ? $! : $@);

# this too:

$S = IO::Socket::INET->new(Proto=>"tcp", Timeout=>1);

$sin = sockaddr_in(80, inet_aton("some.unreachable.ip"));

$S->connect($sin) or die "Couldn't connect: " . ($! ? $! : $@);
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Both of these time out, obeying the value I placed in the Timeout field. If you're having difficulty getting this to work, perhaps Win32 doesn't work well with these timeout settings? See also the 'timeout' method in IO::Socket. I would figure that setting the Timeout argument in the constructor would set this, but *shrug*.

You may just be SOL on the Win32 platform... An alternative might be to use something like Net::Ping to verify the host is reachable before trying to connect to it. The only way your connection should time out at that point is if the port is being filtered by firewalling software that doesn't send ICMP errors.