Last couple of days I made a terrible decision: reinstall my computer. So I reinstalled Windows (XP) three times in the last two days (the dvd with Visual Studio 2008, for some reason, kept killing my CPU) and finally I managed to install VS 2008 and start configuring th ASP.net project I am working on and kept reinstalling whatever I needed, on the flow.
To my huge surprise I could no longer open the solution with Services. The exception message was really helpful :
What I should have realized before starting to google for it ... : I had not previously installed IIS :)
After I installed it Visual Studio was able to tell me that I sholud configure the Virtual Directories for the web serivices :)