Hey mcweb!
I had the same problem, but this is what i did. First of all i had to configure the IIS. I'v got myself a web server, so this was fine for me. My Default website has an IP of 196.125.10.23(not real!), so what i did was, i create a virtual directory called dotnetnuke, under the default website. Then when i create the dnn website, i din't use locahost, intead i use the server ip address, or if it has a host header you can then use it. So on the new website dialog, on location i selected http, then
http://196.125.10.23/dotnetnuke. In this way, the site is created right on the webserver and not the localhost. Make sure yo virtual directory point to the folder containing the dnn site!
Tell me if this help, u r free to ask some more!
I'm out!