VS.Net has a subsystem called ASP.Net, which uses WebDAV to do remote publishing through IIS. This subsystem rejects any pathname that starts with ".", which causes a problem when you try to remotely publish a Subversion working copy, because of the ".svn" subdirectories. The error message says something like "unable to read project information".
To work around this, set the environment variable SVN_ASP_DOT_NET_HACK to any value - this will tell Windows clients to use "_svn" as a directory name in your working copy. See the relevant section of the Subversion 1.3 release notes for more details.