Not using PHP as a web environment I don't. Running exec in a PHP script executes a command on the server, not on the client using it. That would be a tremendous security hole if it were possible to do.
For that I'd suggest writing something in either Java or C#/VB.NET. Both should be fairly easy to set up, and on the same network you can set up the user as administrator on both machines.
Also, as for the exec not working properly, this has to do with piping the output. Effectively trying to call a command is waiting for the command to return the output, and since some commands don't (such as trying to launch notepad), than it will just sit there running infinitely in the browser. Windows in particular is an absolute pain for exec.