Simply expand the references node in your solution and selected the reference you want and by the right click choose properties and the choose the Copy Local property set it to true from the drop down list.

 My problem is that I do not have a solution. When I created a new Web Project with a Solution, I was able to find the References folder and the property Local Copy. What are my options with this project with no solution? Is it possible to set a Local Copy of the reference? Can I add my project to the solution?

You are missing something ... the refernces are related to the project itself and not the solution. The refences node will not being shown by default you need to click on the "Show All Files" button on the solution explorer pane. After that the refences node will be shown.

 Mmmm, I don't see a Show All Files button?!

 If you try to create a New Web Site..., you'll see that when you add a Reference, it gets added to a Bin folder, and no Show All Files is visible, at least on my comp.

website or  a web project is different from web application. Show all files, copy local to true these option are not there in web site. When you add a reference to your project. The dll will be automatically copied to your physicall directory. It implies it is working as if you have set copy local = true in a web application. It also implies that your project is a stand alone, if something is changed outside your project say a function in your referred dll is taking more input parameters, your project will not be affected. Suppose if the referring dll is changed and you want the new version.You can expand the bin then your dll. there is one more file called refresh you can make use of it.

 There is service pack in 2005 if you install it you will be able to create web apps. Web apps have lots of options, it will automatically create the virtual directory in IIS.these things are not in website

 Thank you very much for the explanation. I'm pretty new to this so Web App, Web project, Web site, it all sounds the same to me :) . I'll try to copy the needed dlls in the bin and deploy the site like that and see if that resolves my problem.