To deploy a new version of our website we do the following:
Using Microsoft.Web.Administration's ServerManager class you can develop your own deployment agent.
The trick is to change the PhysicalPath of the VirtualDirectory, which results in an online atomic switch between old and new web apps.
Be aware that this can result in old and new AppDomains executing in parallel!
The problem is how to synchronize changes to databases etc.
By polling for the existence of AppDomains with old or new PhysicalPaths it is possible to detect when the old AppDomain(s) have terminated, and if the new AppDomain(s) have started up.
To force an AppDomain to start you must make an HTTP request (IIS 7.5 supports Autostart feature)
Now you need a way to block requests for the new AppDomain. I use a named mutex - which is created and owned by the deployment agent, waited on by the Application_Start of the new web app, and then released by the deployment agent once the database updates have been made.
(I use a marker file in the web app to enable the mutex wait behaviour) Once the new web app is running I delete the marker file.