IIS 7 ASP.Net connection timeout

I have a rather odd issue that has just seemingly appeared out of nowhere:

 We have a development application database server setup (win2003) which is hosting several instances of sql server (2000, 2005 & 2008).

We develop asp.net applications and I do so using vs2008 on win2008. Until yesterday this wasn't a problem but now when running an asp.net web application on my machine in iis7 connections to databases on the database server timeout.

However, if I run the exact same application using the vs2008 built in webserver it connects fine. I have created the most basic test possible:

public partial class _Default : System.Web.UI.Page
    {
        protected void Page_Load(object sender, EventArgs e)
        {
            string connectionString = "Data Source=my.dev.server;Initial Catalog=mydatabase;User Id=myuser;Password=mypassword;";
            SqlConnection conn = new SqlConnection(connectionString);
            this.txtLogOutput.Text += "opening";
            conn.Open();
            this.txtLogOutput.Text += "closing";
            conn.Close();
        }
    }

 Using IIS7 the above throws a connectionTimeout error on conn.Open() however using the built-in vs development server it works fine.

I've no idea where to go to look for a resolution to this???

Any help MUCH appreciated.

Dan