I'm having same problem.
I'm running IIS on my Win Vista Biz machine.
Have about 20 sites running fine for many months. All of my sites are for local development only so they are mapped to mysite.jon mysite2.jon etc thru my hosts file.Again I have had no problems until recently and have nothing but default settings in my IIS installation.
If I add a site with a subdomain like http://mysub.mysite.jon and then run it I get a popup window saying: IIS Worker Process stopped working and was closed A problem caused the application to stop working correctly.
Resolution that is working so far:
Remove the periods from the SITE NAME in IIS
Sitename in IIS: test.mysite.jon causes error however if I simply rename the site to testmysite.jon it works fine. All other settings including hosts file, bindings, app pool were left the same so I'm suspecting this must be a bug that has something to do with the sitename in IIS.