<p>In visual studio 2008, when we press Ctrl+F5, the ASP.NET Development Server is launched to simulate a Web Server. I'm wondering what server does it simulate? IIS6 or IIS7? Is it possible to customize what server it simulate?</p>

Sorry, a question, not an answer:
What are the server differences between IIS6 and II7 that matter to your code?
For ASP.NET development, the web server itself is somewhat ASP.NET neutral.   It forwards the request to the .NET framework, so THAT's the part that matters.
More info here:
http://msdn.microsoft.com/en-us/library/58wxa9w5.aspx
Adding Morgan Cheng's comment into the answer:
There is some difference between IIS6 and IIS7 on how to explain web.config. For example, to customize UrlRouteHandler, according to MSDN. IIS6 and IIS7 are different. Details in
http://msdn.microsoft.com/en-us/library/system.web.routing.urlroutinghandler.aspx