Solución

a) Run 'CMD' to open up DOS command window

b) cd to C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727           (for ASP 2.0)

c) execute this    ..>aspnet_regiis -i                                               (register)

d) then open  C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\CONFIG\machine.config file

      and modified the line <processModel autoConfig="true" userName="machine" password="AutoGenerate" />

e) stop/restart my seb site

f)  Now, it works when I type in 'Localhost'.  (what a relief, and I hope this help whoever is searching for answer.)

referencia

Para Windows 7 y IIS 7.5

Open Control Panel
  Programs\Turn Windows Features on or off
    Internet Information Services
      World Wide Web Services
        Application development Features
          ASP.Net <-- check mark here

Referencia