No, if there was a problem with using a different database, then the Event Manager would not work.
One thing to note: you may end up running into problems if your website uses a database for content. Depending on the configuration of your website, it's possible that integrating the calendar will break your connection to your content database, redirecting the queries for content to the calendar database.
Those paths look correct.
Looks like I may have just blown my original theory out of the water... calendar.php does run correctly. Or at least it does for the $CSS and $OL lines.
Doing a bit of Google searching brought up several threads about IIS producing 502 errors while having PHP configured as a CGI application. If you have the option to do so, can you configure PHP as an ISAPI extension instead?
That is but one of many possible solutions... but none are related to the calendar and all with how PHP is configured to run in IIS.
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