I think you might want to separate this into two problems, following this recommendation from Dillorscroft.
First, with regard to the material on your development server that is published to the production site, I think you need version control for that. First so you can roll back any page, and you can also decide when you have a stable level of the development site that you want to extract to production. (I would get that from the source control system into a site image and then synchronize that image with the production site.)
So, for the first part, we are talking about versioning the web pages and all of the custom server-side material that supports the web site.
Secondly, With regard to the development of components that are used on the site, they need their own development projects, since it is the result that goes to the development site, not all of the source, libraries, etc. that the component is built with. So these will have their own project development tree (think of it as if you were building a library that is to be used by other development projects, although in this case the other projects are web pages). So the only thing that should show up in IIS is the "deployed" component to the development site.
There seem to be three critical questions for you:
How development of tests that need to go against the web site is handled and where that is version controlled (assuming they do not belong on the web site itself)
How easily you can arrange to make sure that all content on the development web site is kept under version control and checked-in and -out appropriately. (This has to do with the tools you use to edit web pages and other server-side gunk other than components developed off to the side.)
Easily taking developed components from the projects that produce them to the development site and have them be checked-in there.
My solution to (2) and to version control of the development web site is to use Visual Source Safe integration with IIS and FrontPage extensions that places the site under version control. Components produced from other development projects are mapped to the server project by VSS sharing.
For SVN, I speculate that (1) you want to see if there is an SVN adapter that IIS will recognize as an external source-control system and, either way, (2) have a discipline that takes delivery of components from their construction projects into the overall web site project.