I do most of my ASP.Net development using Cassini as my webserver. It looks to me as though the version that ships with Delphi 2007 is the dotnet 1.1 source recompiled which is located here

I recently discovered UltiDev Cassini, full information with a list of improvements can be found here

UltiDev is free and redistributable. You can also use it with  Delphi 2007, I configured it so that it runs from the tools menu.

If you now select UltiDev from the menu, your webapplication runs and an instance of Internet Explorer appears.

You are now able to use attach to process and continue working.

I also found Cassini Version 2

The release notes include the following:

• Cassini v2 uses new ASP.NET v2 hosting APIs (System.Web.Hosting: ApplicationManager, IRegisteredObject, etc.).
• Cassini v2 does HTTP listenning in the default app domain (unlike Cassini v1 that did it from worker app domains). This provides a more robust app domain unloading story.

The link includes an attachment that contains the source code. As long as you have the Microsoft dotnet  framework sdk v2.0 installed, you can find a SDK Command Prompt in program files. If you run that and go to the directory that you unzipped the Cassini source code to. You can now run build.bat which builds and installs Cassini v2 into the GAC.

Inside Delphi 2007 you can now go into options and change the location that the IDE is running Cassini from.

When you now run the debugger, the new version of Cassini is used and it appears to be business as usual.