Did you follow the instuctions to install the PHP module on Apache? Read install.txt in the PHP install folder.
What url do you use to serve straight html files? Suppose you have index.htm in drive:\inetpub\wwwroot, and the server seems to find ok. Put php file in there and see if it actually executes the PHP, at worst it should display the php, which indicates PHP not installed or configured in Apache correctly. When you config apache for PHP, you will also need to set the folder/directory execute settings to allow it to run PHP.
Hope this helps...