<p>When I create a New Project of type ASP.Net MVC Web Application, I expect the dialog for unit test applications to show up, but it does not. I cannot find the Unit Test App among the product types I can create either. How do I set up my VS so that the dialog shows up?</p>

<p>I have installed Visual Studio 2008, .Net Framework 3.5 SP1 and ASP.Net MVC Framework (Beta).</p>

As @MrJavaGuy says, you need to install at least the Professional, not Express, version of VS2008.  Alternatively, you can install nUnit and/or TestDriven.Net and get unit testing capabilities.  Info on nUnit can be found at
http://www.nunit.org/
and TestDriven.Net at
http://www.testdriven.net/
.  I recommend TestDriven.Net even if you have the testing capabilities of Visual Studio baked in.