The DSW is using a filter over the output projects to facilitate selecting the suitable project for hosting the service.
Ccurrently the allowed project types are WebSite (C# & VB), Web application (C# & VB).
If I correctly understand your problem, you most probably do not have a project of suitable type in your solution. Please add a project of one of the types above and then reopen the wizard again.
the Telerik team
Do you want to have your say when we set our development plans? Do you want to know when a feature you care about is added or when a bug fixed? Explore the Telerik Public Issue Tracking
system and vote to affect the priority of the items