by John Ramirez.
Still been kicking this around. Forgot to mention I am using the 12/10 version of Shibboleth.
What I've found so far and I think may be the cause. For some reason in the PHP enviorment the Shibboleth session cannot be seen. At least not in the way that Moodle looks for it.
Since this setup was done to migrate an old moodle installation, I've also done a clean install and tested off that with the same results. I'm going to check with the Shibboleth mailing list to see if there are any people that seen IIS shibboleth to php enviorment issue.