Directory lookup for the file**** failed with the operating system error 2(The system cannot find the file specified.).\r\nCREATE DATABASE failed. Some file names listed could not be created. Check related errors."
I got this error recently while playing with EF code first.
This was my web.config, pointing to get to "|DataDirectory" which is "App_Data" folder in your solution.
But I forgot to create it before execution, so make sure u have App_Data set up already.