Creating a Web Application Project was possible only in VS standard SKU and above in VS 2008. But with VS 2008 SP1 we went ahead and added support for WAP and class libraries in Visual Web Developer Express edition SP1. You can now create WAPs by going
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Read the complete post at http://blogs.iis.net/webdevelopertips/archive/2009/09/20/tip-95-did-you-know-that-web-application-projects-and-class-libraries-are-now-available-in-express-edition.aspx