I hate answering my questions: in my question i stated that i was running VS under the administrator account. This was not true!!!
So the solution (for me) was to run VS2010 as administrator (Start->In Vista menu right click-> Run as administrator)...so simple.
As a side effect: VS2010 let me also create Virtual Directories without any problems (prior to that i got error messages stating that i have to manually adjust these)
You can set Visual Studio to run always as admin. Right click on the shortcut => properties => Advanced => tick on run as administrator.
I'm using Visual Studio 2013 and set administrator privilege for shortcut as @karim said not worked for me, so i get to the devnev.exe file and set administrator privilege in compatibility tab and that's worked. I didn't want to add this as an answer but I couldn't assign a picture, so decided to post it as a new answer.
Hope this helps.
For the benefit of searchers, I was running as admin and still got this, so needed to follow this blog (obviously ignoring some of the stuff related to old .NET versions).
Following that, did a rebuild and it worked.
EDIT: (Following the comments)
Section 2 was of particular interest. It states:
In order to enable F5 debugging, you will need at minimum the following components:
Install them from Control Panel > Programs > Turn Windows Features on and off:
EDIT: (added paths to features):
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