We've got this problem where a few of us are trying to create new ASP.NET applications on our development server, and are getting the the following error message:

Microsoft Development Environment The Web was created successfully, but an error occurred when trying to configure the application root for this Web. Web projects may not operate correctly without an application root. The returned error was: Active Directory Services cannot find the web server. A possible cause for this is an incompatibility between versions of Internet Information Server (IIS) on the client and the server. The usual cause for this error is creating Web projects on a Windows 2000 or newer server from a Windows NT 4.0 client. You can manually configure the application root using the Internet Services Manager.

Followed by:

Microsoft Development Environment Unable to set the permissions on the 'bin' folder to restrict browse access. Active Directory Services cannot find the web server. A possible cause for this is an incompatibility between versions of Internet Information Server (IIS) on the client and the server. The usual cause for this error is creating Web projects on a Windows 2000 or newer server from a Windows NT 4.0 client. You can manually restrict browse access to this folder using the Internet Services Manager.

The workaround that we're using (adapted from https://support.microsoft.com/en-us/help/320451 - broken link) is to set Visual Studio.NET to default to use FrontPage Server Extensions. Once a project is created, you can then change it back to use File Share access.