I believe that the VS.NET New Web Project wizard specifically looks for IIS so it can create the virtual folder and application settings.
However, that doesn't mean you still can't use VS.NET to create a new web project.
Let's say we're going to create MyWebApp.
Create the folder "C:\Inetpub\wwwroot\MyWebApp" and launch Cassini.
For the application directory, enter "C:\Inetpub\wwwroot\MyWebApp"
For the virtual root, enter "MyWebApp"
Now click Start.
Then in VS.NET, select New Project... and instead of choosing "ASP.NET Web Application" the trick is to select "New Project in Existing Folder" (scroll to the end of the list).
Enter the project name "MyWebApp"
Now it will ask for a location. Since this is a web app, you must enter a URL.
Enter "http://localhost/MyWebApp" (this is the URL that Cassini is handling), then click Ok.
After a few seconds, you should now see that you indeed have a new Web Application.
Enjoy!
Kiliman