Debugging local HTTP traffic using Fiddler, while not intuitive, is easily accomplished by adding a dot to your localhost address. In other words, http://localhost:1234 becomes http://localhost.:1234 and traffic is captured like it always is.
This wasn’t quite working for me this morning: localhost was resolving to the IP address of the host machine, without the port or directory bits. I’d earlier disabled capturing by clicking the “Capturing” button in the status bar and that seemed to be causing this behaviour; enabling capture once again and the old dot trick worked again.
Incidentally, after closing Fiddler, I noticed IE8 does the same thing so this is likely a browser behaviour rather than a Fiddler oddity.