Log on to the server with VSS credentials and run the SET command.
Find lines like the following ones:
TEMP=C:\DOCUME~1\USER\LOCALS~1\Temp
TMP=C:\DOCUME~1\USER\LOCALS~1\Temp
Make sure the specified folder exists and that you can perform read/write operations on it.
In addition to user variables, you need to check system variables as well:
Open System Properties, go to the Advanced tab.
Click the Environment Variables button.
Find the System variables section and make sure the TEMP directory name indicated here is valid.