Ran into this error suddenly this week for no apparent reason.  My Windows 7 64-bit has been running many development websites for months, all flawlessly.
For whatever reason, I could no long open any sites in Visual Studio 2010 using the Local IIS option.
I have no idea why.  I have no idea exactly when.  If I open an existing solution that points to a local IIS, works just fine.  But if I try to open the web project directly using the Local IIS option I get the error.
I tried uninstalling IIS 6 Compatibility and reinstall it.  No workie.
I tried deleting and recreating the IIS site.  I tried deleting and recreating the IIS app and the app pool.  No workie.
Finally I just uninstalled IIS entirely from Windows 7.  Then did a reboot.  Then reinstalled IIS (including IIS 6 Compatibility).  Then did another reboot.
BAM!  Back in business now.  Visual Studio 2010 now opens sites and applications using Local IIS just like it used.
Sure wish I knew what caused it…least I know how to fix it again should the need arise.