Best I have been able to determine, is that the FLAC app has to write out files to the directory it is installed to... so, because Vista has strong security rules and FLAC is old, the 2 are butting heads
Install FLAC to your "desktop" directory and see if it works, when it does, it is because Vista wont allow temp files in the "program files" directory, as it is designed to use the user's "application data" directory