I do ping to [127.0.0.1]
I disabled the Norton anti-virus and the Norton Internet Security, but that didn't change results. Spyware and anti-virus scans clean.
The kb884020 fix provided by Microsoft that supposedly fixes the problem connecting to the localhost would not properly install for me. I did get it to install in safe mode but it obviously didn't fix the problem.
After the install of sp2, I connected to localhost once (and retrieved my data from mysql correctly). But there were seven more updates that Microsoft's auto-update suggested that I make and after that, my iis and my connection to localhost went dead. I can't even stop iis because it times out.
I do appreciate your help and your suggestions. I may end up un-installing sp2.