trouble with nopCommerce Installation on localhost

I have downloaded nopCommerce 3.00 web(no source) version and, I have read all of the documentation and I cant seem to get to even get to the installation screen. I will list all my steps:

1. I am running IIS 7.5 and have Visual Studio 2012,as well as Microsoft SQL Server 2012 installed
2. In IIS I have configured the application pool as 'testsite'. It is integrated and is using .NET 4.0
3. I went down to sites and had to create a new site, then I mapped the path to the 'testsite' folder (this folder contains only the contents of 3.00 web nosource ONLY). I also set the application pool to "iis apppool\testsite" and clicked check names and after IIS found it I added it.
4. After that I added the necessary file permissions and gave 'testsite' full control as well as modify rights.
5 . Next I converted went back up to the testsite website node in IIS and added a virtual directory, I named it 'testsite' and set the path to the testsite folder again.
6. I go to sql and open make a new DB called testsitedb

when I try to navigate to it I get "It is an error to use a section registered as allowDefinition='MachineToApplication' beyond application level.  This error can be caused by a virtual directory not being configured as an application in IIS"

so I go back and convert it to an application and navigate to it and get the same thing!! Any suggestions would be great. Many thanks in advance!

Edit...
I wanted to post my stack trace

Line 51:     <authentication mode="Forms">
Line 52:       <forms name="NOPCOMMERCE.AUTH" loginUrl="~/login" protection="All" timeout="43200" path="/" requireSSL="false" slidingExpiration="true" />
Line 53:     </authentication>

It is an error to use a section registered as allowDefinition='MachineToApplication' beyond application level.  This error can be caused by a virtual directory not being configured as an application in IIS. (C:/inetpub/wwwroot/testsite)

I guess everyone else is as stumped as I am. Will making a paypal transfer of 20 bucks to someone for a join.me session help to get a resolution?

can I get some help?!? anyone?!?

Have you tried installing nopcommerce 3 using the Server Compact instead of an SQL database?  It sure makes it a lot easier if you are wanting to test it out on your local machine.  Also, when you say that you have .NET 4 are you meaning you have ASP.NET 4.5 (MVC 4.0) as stated in the system requirements?  

I installed a pre-release of nopcommerce 3 using the Server Compact with MS 2012 visual studio express awhile back and it worked just fine.

Try this, download nopcommerce full source.  Make sure you have ASP.NET 4.5 (MVC 4.0) installed.  Then open it up in visual studio 2012.  Then, under "debug" click on "Start debugging."  This should open up a browser with the nopcommerce install page.

Now when you install, pick the option "Use built-in data storage (SQL Server Compact)."  This will allow you to install on your local machine without having to set up an SQL database.

For me, this is a lot easier when I am just wanting to edit and change the code.  Give it a try and see if you can get that to work.

After I am done changing the code on my local computer, I then compile the code and deploy it to my host's server.  At this point I clear the settings.txt and install using an SQL database on my hosting slot.

[please delete] - Sorry my post got double posted.  Please delete this one.  When I was trying to reply it said there was an error, but now when I look it was posting after-all.

Web Matrix 3 takes a lot of the hassle out of using IIS and Visual Studio.

Try opening folder as site (nop 3.00) and web matrix will take of everything else.