I have since found a workaround for this issue...
When you have installed and successfully setup your Visual Studio 2008 environment on Vista and have managed to open the DNN Source Solution and you are ready to add your first DNN Compiled Module Project.
Add a new DNN Compiled Module from the Starter Kit, You will eventually get a dialog box that warns you that the url http :// localhost/dotnetnuke_2 is not configured for ModuleName1, it gives you a choice of creating a new Virtual Directory - go ahead and click "yes", it will fail but that is ok for now.
What has just happened is that the files for your new module have been created but the new ModuleName2.vbproj will not get added to the solution.
To add the project to the solution, you will need to edit the ModuleName2.vbproj file in NotePad.
open the project file ModuleName_2.vbproj and locate the following:
<WebProjectProperties>
<UseIIS>True</UseIIS>
<AutoAssignPort>True</AutoAssignPort>
<DevelopmentServerPort>4825</DevelopmentServerPort>
<DevelopmentServerVPath>/</DevelopmentServerVPath>
<IISUrl>http://localhost/DotNetNuke_2</IISUrl>
<NTLMAuthentication>False</NTLMAuthentication>
<SaveServerSettingsInUserFile>False</SaveServerSettingsInUserFile>
</WebProjectProperties>
and change to:
<WebProjectProperties>
<UseIIS>True</UseIIS>
<AutoAssignPort>True</AutoAssignPort>
<DevelopmentServerPort>4825</DevelopmentServerPort>
<DevelopmentServerVPath>/</DevelopmentServerVPath>
<IISUrl>http://localhost/DotNetNuke_2/DesktopModules/ModuleName1</IISUrl>
<NTLMAuthentication>False</NTLMAuthentication>
<SaveServerSettingsInUserFile>False</SaveServerSettingsInUserFile>
</WebProjectProperties>
Save the file and go back to VS2008 and add the project to the DotNetNuke Solution.
You may have to allow VS2008 to convert the project but this should be a nonevent and you should now be in a position to start developing you new module.
Hope this helps those having the same issue and you can enjoy the added benefits of using Visual Studio 2008
Craig
UPDATED
Fixes to make this perminent are posted here: http://www.dotnetnuke.com/Community/Forums/tabid/795/forumid/111/threadid/195301/scope/posts/Default.aspx