If you are using Windows XP then there is no way to upgrade IIS on this OS.
IIS is shipped with the Windows Operating System and somewhat coupled
with the Operating System. You are not able to upgrade IIS complete
version on your current operating system.
There is only option available to use some features of IIS 7 is II7 Express with your Visual Studio 2010.
Another is create virtual machine of Window 7 with microsoft virtual machine to using complete features of IIS 7 and if you you somewhat advance user then configure your debugging environment between your windows xp and the virtual machine OS (windows 7).
Check these links for reference:
Running a WebSite using IIS Express from the Command prompt and Visual Studio Integration
Running IIS Express from the Command Line
There is no problem in connecting IIS to sql server.. just some
connection related problems and missing connection drivers can cause
problem. if everything is correct then all will work fine.
EDIT: By comments
SQL Server is not a part of IIS. It needs license to use and installed separately except Express Edition that is provided with Visual Studio. If you are installing Visual Studio then you can select SQL Server 2008 Express Edition to install with it.
If you do not want to install Visual Studio then you can get SQL Server Express Edition separately on Microsoft website. you just need
MDAC (Microsoft Data Access Component) to establish connection between SQL server and IIS.
In ASP.net, Add this under the tag to specify connection string. here
.\sqlexpress is your SQL Express default instance name if you install sql server with your visual studio installation or your
Here is some installation steps for sql server 2005 standard edition and for SQL Server 2008 R2 - step by step.
and download SQL Server management studio express to work easily with databases and search on google "how to attach database sql server management studio" then connect your web application to sql server database using following stuff to check connection etc.
<add name="ConStr" connectionString="Data Source=.\SQLEXPRESS;Initial Catalog=mydbname;Pooling=true;Integrated Security=SSPI" providerName="System.Data.SqlClient"/>
Access this connection string with name ConStr in your asp.net code using
using (con = new SqlConnection(ConfigurationManager.ConnectionStrings["ConStr"].ToString()))
//Data Manipulation code