ITunes Error: iTunes Library file cannot be saved.

This error can be caused by several different misconfigurations. You should check each of the follow (in this order). I had one that bugged me for 2-3 weeks on a new Windows 7 Professional installation that turned out to be #3 on the list. Hope this helps!

1. Make sure you are a local Administrator on the machine. A lot of times in Domain (or networked) environments the Network Administrator will not make the domain account a local administrator.
2. Make sure you have full rights (read and write) to the iTunes Music folder. It would not hurt to change the owner permissions to yourself as well.
3. If iTunes has ever had a problem in the past updating the library (maybe because of #1 or #2 above or any other reason) it will write the change out to a *.TMP file in the iTunes Music folder (same place the library file is stored). Until you reboot in Safe Mode and delete these *.TMP files you will continue to get the error. (Note: I had 30 of these files on the machine I had the issue with)
4. Change the shortcut to "Run as Administrator".