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I am looking for the cheapest possible way to host a bespoke ASP.NET intranet site with Microsoft SQL Express 2008. I assume that Windows Server 2008 R2 Foundation is the way to go, but does it support IIS? There will only be about 5 clients on the LAN, so the hardware limitations aren't an issue.

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Yes it does. No offense nbolton, but this information isn't that hard to find.

http://www.microsoft.com/en-us/server-cloud/windows-server/2008-r2-editions.aspx

Click the Compare Editions link on the right, open the PDF document, and see that web services (IIS) is fully supported.

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None taken! :) You're probably just more observant than me. I wasn't expecting it to be a PDF (I thought that usually MS have a web page for the feature comparison table). – nbolton Nov 10 '11 at 20:45
That's been my experience too although I've been seeing them using pdf's more and more. Go figure. – joeqwerty Nov 10 '11 at 21:14
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