Visual Studio 2008 & IIS7 Rewrite Module

Hopefully I am just missing something here...
I am removing all traces of querystring based URL's from my site. For this I'd like to use the IIS7 Rewrite module, as it's nicely integrated with IIS7 (rather than a dll or an add-on) and is supported by discountasp. As you might expect this involves quite a lot of work, not just creating the rules (that's the easy part) but updating all theinternal hyperlinks most of which are dynamically generated.

I seem to have come across a major drawback with this in that not only does Visual Studio 2008object to the <rewrite> section in web.config (invalid child element 'rewrite'), but the built in debug webserver doesn't appear to process the rules either. This makes it awkward to test anything in my site from now on as none of the links work. Now I know I could install IIS7 on my dev machines etc. but this just seems like a big hole to me. I have installed IIS7 on my dev machines and applied the rewrite module to it, I am using Vista Ultimate Sp1 with .net 3.5 sp1, VS2008 Sp1 all fully patched/hotfixed/bang up to date. IIS7 reads and processes the rules, VS dev webserver does not.

I have gone back to using urlrewriting.net instead as VS supports it fine and I can carry on testing/debugging using the built in development web server.

I have been Googling this for days with no luck (2 similar unanswered posts is all I found). I cannot believe I am the only asp.net web developer who has come across this problem. Hopefully some bright spark out there will explain what I am doing wrong, or whether we have to wait for a patch for VS2008 or even Visual Studio 2010.