I have a website project, not a web application. I have Visual Studio SP1 (beta) installed, but I only see the option to use an external web server; there is no \"Use IIS E
I just installed Visual Studio 2010 SP1 as well as IIS Express and I found a right-click option on my web project called "Use IIS Express". Scott Guthrie talks about it here: VS 2010 SP1 (Beta) and IIS Express .
Support for IIS Express will not come until Visual Web Developer 2010 SP1 is released later this year.
VS 2010 SP1 beta has support for IIS Express. I am not sure if you have installed IIS Express separately or not (VS 2010 SP1 does not include IIS Express and you need to install it separately). If you haven't installed IIS Express install it from here