There are security issues with .vsdisco files, so they are usually disabled by default.
Since you say you are sure you got the correct location this is probably your own webservice. In that case, have you configured the webservice to enable the vsdisco? (I think both in web.config and machine.config)
Have you tried accessing the webservice from its actual address?
vsdisco is an automatic discovery service that will produce a dynamic .disco file, which is a directory file of available webservices. This directory will then list the actual webservice addresses, which usually are .asmx or .wsdl. When you add an webreference this usually is directly to the .asmx or .wsdl