I have a .net 3.5 asp.net web service that impersonates a domain user
Code:
<identity impersonate="true" userName="Domain\TMHost" password="password"/>
If I deploy this WS to IIS it works fine but I cannot get it to work within Visual Studio using the Development Webserver.

Here is an example of an entry from my Event Log
Code:
Exception information: 
    Exception type: HttpException 
    Exception message: Failed to start monitoring changes to 'C:\1work\temp\NotificationWatcherWebServiceClean2010\NotificationWatcherWebService\NotificationWatcherWebService\global.asax'. 
 
Request information: 
    Request URL: http://localhost:1913/NotificationWatcherWebService/Service.asmx 
    Request path: /NotificationWatcherWebService/Service.asmx 
    User host address: 127.0.0.1 
    User:  
    Is authenticated: False 
    Authentication Type:  
    Thread account name: Domain\TMHost 
 
Thread information: 
    Thread ID: 8 
    Thread account name: Domain\TMHost 
    Is impersonating: False 
    Stack trace:    at System.Web.Compilation.BuildManager.ReportTopLevelCompilationException()
   at System.Web.Compilation.BuildManager.EnsureTopLevelFilesCompiled()
   at System.Web.Hosting.HostingEnvironment.Initialize(ApplicationManager appManager, IApplicationHost appHost, IConfigMapPathFactory configMapPathFactory, HostingEnvironmentParameters hostingParameters)
By the way I don't have a global.asax within my project although I tried adding 1 and gave everyone full permissions to it, but to no avail.

I've been struggling with this for hours so any help massively appreciated.