These are the project settings that I would have for a typical local project.
Project: C:\Documents and Settings\plugnplay\My Documents\_PhpEdProjects\example.ppj
Root directory: C:\Inetpub\apache_htdocs\example
Root URL: http://example.local:86
Remote root directory: C:\Inetpub\apache_htdocs\example
Default file to run: C:\Inetpub\apache_htdocs\example\index.php
Mapping Remote / Local:
C:\Inetpub\apache_htdocs\example -> C:\Inetpub\apache_htdocs\example
Try getting through the Wizard and even if the testing doesn't work, save the settings then go into Project Properties to review what needs adjusting.
I don't use localhost as it causes too many little issues. Assuming apache_htdocs was my root Apache folder (from an Apache web serving perspective; not from a PhpED perspective), then I could use a Root URL of
http://localhost/example
If you are new to Apache then I encourage looking at setting up virtual hosts with your own domain names in the httpd-vhosts.conf file. That's pretty easy to do, just a few little tricks. Remember you can use the Windows hosts file to setup your own domain names if you do not have a local DNS.
Also, I do .NET work on port 80, so I use port 86 for Apache and the only place I need to use that is on the Root URL.