If the folder is on a local hard disk and it's not trusted, it means Win XP SP2 thought you downloaded the code and didn't recompile it on your machine, therefore it's not trusted.
If you configure Windows explorer to show hidden files you'll see the zone files that are causing the errors.
There are 2 ways to fix this:
1) make sure you build the whole project before pressing F5 to run it
2) delete the zone files yourself, or run the cool zonestripper utility program:
The problem about the Web Deployment project is that you didn't install that from MSDN. You can remove that project until you're ready for it. It's explained in the deployment chapter.
Please let me know if this doesn't fix your "trust" problem. I guess its also possible that you're not an administrator on your computer, but most developers and home users are, so this probably isn't the issue for you.