If you can drop a malicious DLL where putty.exe lives, can't you just drop a malicious putty.exe?
Additionally, something can infect your PC and alter your PATH. Then PuTTY might pick up a fake Windows DLL from elsewhere on your machine. But if your machine is infected and something is messing with the Windows path, you have bigger problems.
Screenshot: https://i.imgur.com/MvRwZBi.png
I'm surprised they finally did something since we've been warning people not to use Chrome because of this issue for years.
Enumerating badness has always been a very bad idea.
Windows, by default requests elevated rights from the user (the UAC dialog) if you run any exe that has 'setup' or 'install' in the name, or if the manifest inside/alongside the exe defines a requirement for elevated rights.
You can spot these files as they have a little Windows 'shield' overlay on their icons (Windows overlays that itself if it detects a file needing elevated rights).
So, unless you can elevate your rights (i.e. be admin, or type in admin credentials), you can't run most installers.
However, prior to Windows 7 your personal start menu folder wasn't locked down - and as a non-admin you could easily add/remove shortcuts from it. Since Windows 7 onwards it's now protected, so you need to elevate to be able to write to it.
Windows allows you to run (by default) software from ANY folder you like, but you can only (by default, again) write to some of your user folders and the the %TEMP% location.
So downloading the PuTTY exe and running it from the downloads folder or desktop is perfectly legitimate, although not good practice.
As an aside: I'm not sure if Chrome still does it, but I recall that if you try to install it and you don't have admin rights, it just puts an icon on your desktop, and installs all the chrome files into a folder under ProgramData which resides in your user hierarchy, instead of the locked down Program Files area. Which is one way of getting around the lack of admin-rights.
Windows security model is inadequate, but it's good to work around it anyway.
Security fix: the Windows PuTTY binaries should no longer be vulnerable to hijacking by specially named DLLs in the same directory (on versions of Windows where they previously were). See vuln-indirect-dll-hijack.
Windows PuTTY no longer sets a restrictive process ACL by default, because this turned out to inconvenience too many legitimate applications such as NVDA and TortoiseGit. You can still manually request a restricted ACL using the command-line option -restrict-acl.
The Windows PuTTY tools now come in a 64-bit version.
The Windows PuTTY tools now have Windows's ASLR and DEP security features turned on.
Support for elliptic-curve cryptography (the NIST curves and 25519), for host keys, user authentication keys, and key exchange.
Support for importing and exporting OpenSSH's new private key format.
Host key preference policy change: PuTTY prefers host key formats for which it already knows the key.
Run-time option (from the system menu / Ctrl-right-click menu) to retrieve other host keys from the same server (which cross-certifies them using the session key established using an already-known key) and add them to the known host-keys database.
The Unix GUI PuTTY tools can now be built against GTK 3.
There is now a Unix version of Pageant.
I had a quick hunt for it but couldn't see it on the release page.
What new private key format is that?
As of 0.68, PuTTY will no longer fall back to SSH-1 if the server doesn't appear to support SSH-2; you must explicitly ask for SSH-1.