The problem is the web.config file. You need to find the Tag that is specified and set it to off like the error explains.
Then you need to place the web.config file in the root directory. Keep the one in the folder of your project but put a copy in your folder "Inetput" which has wwwroot as a folder in it.
You may get a different error after this like i did. This error will ask you to change the tag <authentication mode="Windows" />
to this <authentication mode="None" />
Finally, if you receive the ParseError. I needed to open IIS management console and make the project folder an "Application" by clicking CREATE
Depending on what version of Server is running, the way you go about changing the directory to an "Application", may be different.
I hope this helps. It took me quite a while to figure this one out because the answer is nowhere to be found on the internet. I done searches all over in microsoft, yahoo, Google, all over. I found nothing. So I ended up readin the errors word for word and changing the Tags it suggested in the error, copying the web.config files into every directory the project is in, until i got it working. Then I got another error, which I had to change the webconfig files and so on.
Grad School Next Semester for Computer Science finally paid off. After all the fruitless searches I was forced to solve my problem.
Goodluck and let me know how it trns out for you.
Chris
MrBigTime@comcast.net