Juz saw this FAQ question in the link above. Done that and tested that. Works fine. Sorry for not going through the link before asking..

Question
The project cannot be run in Visual Studio .NET 2005 in debug mode because of an exception error caused by calling the SetWindowsHookEx. Why? Is it a problem of .NET 2.0?

Answer
The compiled release version works well so that cannot be a .NET 2.0 problem. To workaround, you just need to uncheck the check box in the project properties that says: "Enable Visual Studio hosting process". In the menu: Project -> Project Properties... -> Debug -> Enable the Visual Studio hosting process.