OK, I got the can't display form problem resolved, the "Free all the way" document is not very clear on using VS 2008, but combined with the tutorial on how to migrate a Windows Form application to VWG brought it all together.
In summary, I created a second Visual C# Windows application project, designed my form (Form1) and changed the output type to a class library. I then created a reference to the Gizmox Forms library and changed all references from System.Windows.Form to Gizmox.WebGui.Form.
In my Visual Web Designer project I set a reference to the DLL output from the C# project and changed the Applications section of the WebConfig file to use the namespace and assembly name of the C# project output. It works, but only under debug.
I still get the unable to load the Server DLL if I try and to navigate to the web page from any browser (for example "http://localhost/webguitest6/Form1.wgx" - I still get "Could not load file or assembly 'Gizmox.WebGUI.Server, Version=3.0.5701.0, Culture=neutral, PublicKeyToken=3de6eb684226c24d' or one of its dependencies. The system cannot find the file specified."
I realize that debug uses a temporary virtual path to execute from, I still cannot resolve why I get this error.
I have verified that the Server DLL is in the bin directory of the virtual path, and that it is the correct version and has the correct public key.
Thanks for everyone's help.