I experienced this problem with a new install of DNN 7 when also using the "Module Development Template" by Chris H. In my case the issues seems to be related to this find by Chris: "the DESKTOPMODULES folder randomly gets turned into a Virtual Directory, that will cause problems with the site. Try removing the Virtual Directory in IIS" http://www.chrishammond.com/blog/item...

So although the other fix in this post corrected the one problem, it didn't correct the underlying issue, and other problems remained.

Makes me think this error is caused because there is some missing parameter.
  I got around this by doing the following:
1 - In DNN properties, select the  "Set as Startup Project".
2 - Click the DEBUG menu option.
3 - Click your dnn "properties" at the end of the drop down menu.
4 - Select the "Start URL:" option.
5 - Enter the URL you use in the browser that starts your dnn.
6 - Notice the dropdown shows you other URL's you can use (if you have used others for this dnn project).
7 - F5 (for debugging, i had good luck with the attach to process method of debugging. Perhaps its just a good way to debug DNN).
   Here are some other issues I encountered debugging DNN and my code not stopping at the breakpoints.
Be sure you are loading your PDB Symbols - Once you are in debug mode, go the the DEBUG menu, Windows, Modules and make sure Symbol status is loading the symbols. If not, Options, Debugging, Symbols - check Microsoft symbol servers and specify (Create a folder) a place on disk to put the cached PDB files, select "All Modules"..
In Options, Debugging, General, uncheck "Enable Just My Code".
When using the attach to process method of debugging  DNN, remember, w3wp.exe does not show up UNTIL you make your first request to IIS (Calling up a web page).
  These are just some points i ran across when trying to debug DNN.
  if there is something i could do better here, anyone can let me know.