the error means the web URL used for the Testing server settings in the site definition is not right.
you say you created the site folders at:
D:\xampp\htdocs\site
and the URL you are using is:
http://localhost
this is not correct. the http://localhost address maps to the root of the D:\xampp\htdocs folder.
where the site is defined as a subfolder of the htdocs folder, the address must include that subdirectory:
http://localhost/site