Finally I've managed to get the webservice work on the TFS VPC. What did I do? There are some further things you have to have in mind when deploying on the VPC (when developed on another machine):

• Make sure that the right version of ASP.NET is used (should be 2.0.50727). This is easily changed through the IIS Manager by right-clicking on your website --> properties --> ASP.NET tab.
• You have to change some parts of the XML schema for your client. This is because it uses Windows authentication, and the <identity> entry must be adjusted to the user logged in on the VPC (in this case TFSSETUP). So make sure your <client> ... </client> part in [clientfilename].exe.config looks like this:

1         <client>
2             <endpoint address="http://localhost:38970/Service.svc"
3                 binding="wsHttpBinding" bindingConfiguration="WSHttpBinding_IService"
4                 contract="ServiceReference.IService" name="WSHttpBinding_IService">
5               <identity>
6                     <userPrincipalName value="ORCASBETA2_TFSV\TFSSETUP" />
7                 </identity>
8             </endpoint>
9         </client>

The thing you need to change is on line 6 (userPrincipalName). Also make sure that the endpoint (line 2) is linked correctly (see previous post).

Phew! Now I just have to do some fine-tuning to adjust it to our code metric model. And figure out how to make TFS recognize this webservice exists...(anyone?)