I was able to get the time conversion to work. What I did was upgrade to splunk version 4.3.2 on the forwarder and indexer, added spaces around the "=" for the TZ variable, changed the timezone to "Africa/Casablanca", and I restarted the splunkd service on the indexer. I am not sure if all of those were required for the fix, but after I did all that the time conversions started working.
Here is the new props.conf config from the indexer for reference.
[iis-3]
pulldown_type = true
MAX_TIMESTAMP_LOOKAHEAD = 32
SHOULD_LINEMERGE = False
REPORT-iis_referer = iis_referer
TRANSFORMS-comment = comment
TZ = Africa/Casablanca
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