+1  A: 

Accoring to this blog post, the ability to add web application projects was added in SP 1 of VWD. Try downloading and installing it again.

Sean  2009-05-04 23:39:48
I have already uninstalled and reinstalled the latest version.
 2009-05-04 23:48:10
A: 

Go to Tools->Import and Export Settings, then "Reset all settings". The New Project menu option then magically appears.

 2009-05-11 17:19:35

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