<p>I am trying to debug a web application through IIS that has a virtual directory other than localhost.  It compiles fine but gets the above message anytime that I try to start debugging.  I have compilation debug="true".</p>

Right click your 'web' project and select 'property pages'.  Then change 'Start Options' to 'Don't open a page. Wait for a request from an external application.' and for server, select 'Use custom server' with Base URL: '
http://localhost/your_virtual_dir/
'
Then with a web browser opened pointing to the IIS location (and virtual dir) you setup, the two should work in tandem with each other.
Hope that helped.