Using Web Application Projects (WAP) is fine, another option is:
1) Use this set-up: Setting-up the Environment (using IIS)
2) You do not have to compile each time, simply save the page and refresh your web browser
3) If you need to compile to check for errors, select "build page" to just build the page you are working one (files in the app_code directory do require a full build)
4) To debug use Attach To Process (requires the full version of Visual Studio 2005)