Access denied when compiling C++ from within emacs under cygwin

[Amadeus W.M.]

I'm using windows emacs from within cygwin on my XP machine at work. I 
start a shell first, go to the directory where foobar.cpp resides, then

emacs foobar.cpp &

and finally, within emacs I do M-x compile
g++ foobar.cpp

The compilation fails with an "Access is denied" error message. Again, 
this is with windows emacs. The program does compile at the prompt in the 
shell, and it also compiles with cygwin's emacs-nox, so it's not a 
permission problem, nor a cygwin problem, it's windows emacs (possibly 
interacting somehow with cygwin).

Does anyone have any suggestions how to even start debugging this? I have 
emacs-23-1 and cygwin 1.7. I tried emacs --debug-init but no messages are 
being displayed. 

My machine has recently been upgraded and on my old one I was running the 
same emacs-23-1, with the same .emacs file under cygwin 1.5 or so and I 
had absolutely no problems.