This has been happening again to me. Sometimes after I try to upload the site it will go through all the steps like it's Publishing the site then at the end it comes up with the "Illegal Argument". Almost all the time when this happens I can do the Control-Alt-Delete to Task Manager and close VSD and everything is saved when I re-open VSD.
Today I was editing a site and clicked outside the site area with a text box open. Got the "Illegal Argument" again but this time it wiped out all my work. I had one large page done and working on a second page, both reverted back to what was there prior. Got to remember to hit that SAVE button more often! AAArrrrggggghhhhh.......