Breaked my head figuring out the above mentioned issue. It looked silly to me because it was just a normal Win2k3 server. Then why wouldn't it execute the exe's that i copied from another machine.

After browsing through the internet for a while, the below solution worked for me.

As i had copied the exe file from another machine, right clicked the exe file, Under General Tab, clicked the "Unblock" button.

seems like a Security Feature in Win2k3 and it says - "The file came from another computer and might be blocked to help protect this computer".

Some people got this problem fixed by:
going to add/remove windows components, then uninstalling the "Internet Explorer Enhanced Security component"

These issues seems to be strange and irritates sometimes, hence thought of sharing. May help someone.