I have DotnetNuke loaded in Visual studio 2010. The 'use custom server' option under 'Start Options' is disabled. Why is it disabled? What does 'Use Default Web server' default to? How do I change what the default is? In earlier versions of VS i was able to switch between IIS and the internal web server (Cassini). Now it's more confusing in VS 2010!
Would the project type, Web Application Project vs Web Site project, affect the setting?
I have all these options working just fine on my machine, and I've tried it with quite a lot of solutions, web applications, and web projects. It worked everywhere...
In your case I think it might either be a permissions issue, or some problem with the installation..
What version of VS do you have installed? Web developer? Pro? Ultimate? Did it throw any errors during installation?
Are you sure Cassini is installed and available on your machine?
Also, you could try running VS as admin. Sure, it should still work without it (and it does, trust me :P ), but it might help find out the problem...
UPD: Which os do you have, and is it 32/64 bit?
What exe files do you have in these folders?
C:\Program Files\Common Files\microsoft shared\DevServer\10.0
C:\Program Files (x86)\Common Files\microsoft shared\DevServer\10.0