I received the following error : The Web application at (URL) could not be found. Verify that you have typed the URL correctly. If the URL should be serving existing content, the system administrator may need to add a new request URL mapping to the intended application while trying to access sharepoint site collection using sp api from an asp.net web application.
This was happening because the ASP.net application pool identity did not have enough previlages. Changing asp.net application pool to run under same identity as MOSS application fixed the issue.
More details can be found at Dragon Panjkov's blog.
http://www.sharepointblogs.com/panjkov/archive/2007/10/18/asp-net-moss-and-app-pool-identities.aspx
