In previous versions of VS.Net you could take a project and go File->Source Control->Add Selected Project To Source Control and you could simply add the project to your VSS provider.
Now in VS.Net 2005 (maybe caused by VSS 2005, or VSS 2005 over HTTP), if you follow this route you will end up with File->Source Control->Add Project to Source Control, and your project will be added with the following path:
Thanks VSS, thanks a lot. I really needed that .root in there.
To get around this problem, just add another existing project to VS.Net (creating a solution). Now highlight the actual project you want to add and do:
File->Source Control->Add Selected Project to Source Control and all will be wonderful.