ESET comes with a little HTTP firewall as well. So easy right? Just disable the firewall, WRONG!!! Error was still occuring. So after googling for a bit I found my problem. I was right, ESET was to blame, but I hadn’t approached the situation from correct angle. To fix the situation you need to add Visual Studio to a “safe list” so that ESET doesn’t block it.

To unblock Visual Studio do the following: open ESET and click setup -> advanced firewall setup -> antivirus & anti spyware -> web access protection -> HTTP -> webbrowsers. ESET will then show a list of Applications, find VS2008/2005 in the list and deselect it. Save your changes and close the setup window.

And there we go, VS2008′s buildt in Dev Server will now work again!