To answer you shortly ...
So how would you like me to install monox on my local machine using Visual Studio 2010 ? YES
1) Should I just open it as a website and press F5 and I should see the installation process ? YES
2) Should I create a blank database on server and manually add the server / login credentials in connectionstring in webconfig ? NO, you should create blank database and manually add credentials then you should start MonoX installation
3) Should I do the 2nd step plus run the "CreateDatabase" script against the new blank database ? NO