Hi Katherine,
For connection strings I always thought that (local) was equivalent to localhost because in practice either one usually works for connecting to the current machine, but when I googled for a link to share with you I learned there is a difference from this blog post. Given the difference I would generally use localhost to use TCP for the connection. With (local) it uses named pipes which also usually works fine on the local machine. When you use Katherine-serv, that is actually the NetBios Name.
For understanding how to setup multiple sites in IIS (without using non standard ports) you'll need to learn about IIS host headers and how they resolve requests to a specific web site when multiple web sites are using the same ip address. But to really understand that you need to understand the background information about host name resolution, the hosts file and the loopback address.
For testing and dev purposes it is easy to setup additional web sites in IIS using made up host names added to the hosts file at
c:\Windows\system32\drivers\etc\hosts
You'll have to run Notepad as administrator and change the file open dialog to open all files since the hosts file has no file extension.
Then you can make up arbitrary host names and point them to the loopback address and then you can setup additional web sites for testing by using those made up host names for host headers.
You'll see that the hosts file already has
127.0.0.1 localhost
and that is what makes the default web site able to run using localhost as the host name
but you could just as easily add
127.0.0.1 cheeseburber
and then it would also work for http://cheeseburger/
Then you could create a new web site and set cheesburger as the host name/host header for the site and that would make requests for cheesburger be handled by the new site instead of the default web site.
Anyway the above links should make some good reading and learning these concepts will clear up a lot in your understanding.
Hope it helps,
Joe