For windows XP and VS2008.

Kept getting the problem randomly and I suspect it is tied into some other app using the default port VS2008 is allocating, which I can't see how to change. Once I got the error I just used the solution below.

Haven't found the reason for the problem but I think the work around, based on the points made by Rosario Carbone in http://forums.asp.net/p/1189567/2448204.aspx is the best. This solution works fine and I think is the best work around.

Instead of going through all the steps of creating menu tool I just put in the "c:\Program Files\Common Files\Microsoft Shared\DevServer\9.0\WebDev.WebServer.exe" /port:80 /path: c:\...foldername..\..virtual directory..

Then in properties page of the VS2008 project "Use custom server" and enter in the "Base URL:" --> http://localhost/  place in port number if you used a different number in previous statement.