HTTP Error 404: Not Found - while creating a project with Visual Interdev 2003

[Pai]

Hello there,

every time I try to create a project using Visual Interdev 2003, I get
the following error:

The default web access mode for this project is set to file share, but
the project folder at "http://localhost/_layouts/test" cannot be
opened with the path "C:\Program Files\Common Files\Microsoft
Shared\Web Server extensions\.." the error returned was

Unable to create project "_layouts/test" the file path"c:\..." does
not correspond to the url "..". the two need to map the same server
location.
HTTP Error 404: Not Found

I tried the following article:

http://support.microsoft.com/default...;EN-US;Q320265

still i get the same error.

then i went ahead and added .tmp to the MIME extension.

I have logged in as the administrator.

but no luck....

Please help....

Thanks in advance...

Srikanth