Since my last post about the ASP.NET development server mysteriously not working it seems that Microsoft and several security firms have confirmed that the issue was definitely caused by Windows Defender and due to one of its definition updates that went out on Monday evening (9th March).
Read about it on CNET.
Windows Defender mistakenly raised the Win32/PossibleHostsFileHijack alarm deleting the crucial mapping between localhost and 127.0.0.1. DOH!