How to: Fix “Directory ‘C:\Inetpub\wwwroot\wss\VirtualDirectories\80\_catalogs\masterpage’ does not exist.”

When developing with the AJAX components of .Net it is often wise to use PageMethods to increase performance of your page.

Unfortunately when you enable it in C# like

SharePoint will greet you with the error

To fix this issue you have to install the following hotfix
KB957661
http://code.msdn.microsoft.com/KB957661/Release/ProjectReleases.aspx?ReleaseId=2293