Thanks for the reply, Thomas.
Unfortunately I have already tried the things you suggest. If I install IIS 7 with the IIS 6 Metabase and Configuration Compatability I get the error - "Cannot find 'http://remoteurl" on localhost..." - when trying to open the existing project files. The issue seems to be that it is not even trying to resolve the http://remoteurl address, but insists on looking on localhost.
If I try to create a new Web application on a share that works fine. But once I try to use the project properties, go to the Web settings and set it to "Use IIS Web server" with a remote URL it comes back with the message "IIS is not installed on this computer. To access local IIS Web sites, your must...."
I do run VS 2005 using Admistrator permissions.
I have not been able to develop for any of the projects we have in this scenario for 4 weeks now so needless to say anything you can do to help is highly appreciated.
Any more ideas?