You've got a couple things to look for. I don't have XP Home, but I wondor if you can set a virtual dir to be an application dir on XP home - I don't think you can. Try right clicking on the folder and selecting "Sharing and Security", then "Web Sharing" - do you have these options?
I know Cassini works with XP home but I haven't used it myself. You have to have a way to tell it what the root dir is, and that it is an application.
I don't know this for sure, but I'm guessing the term "application" in this context means that you want the FrontPage Server Extensions installed in that folder? Can someone else confirm or deny this? The Front Page extentions are used by Visual Studio to edit files in that virtual directory.
Web Matrix and Borland's C# Builder both support Cassini and they do NOT need the FrontPage Extentions. But I think Visual Studio 2003 does need it, and this alone may not let it work on XP Home. The new version of VS 2005 (coming out in beta real soon) does not have this limitation, and it will work fine with it's own integrated version of Cassini, and it will work on XP Home. It can use FTP or HTTP instead of the FrontPage Extentions.
I'm guessing that Cassini may not even understand the concept of a virtual directory? It might assume that your application dir is always going to be the root for the web site. The error you posted hints at this. If this is the case, you'll find that ThePhile is not set up to run out of the root dir in a web site. It assumes you will run it from a virtual dir called "ThePhile":
It is NOT set up to work this way:
I could be off base on some of these ideas, but I wanted to give my 2 cents. I hope other people can add more info.