Starteam check out confusion

I use build 3212. I am used to CVS and don't understand how Starteam integration works.

I have configured Starteam as version control. Test Connection is successful.

If I set the working path to the same dir as where i have the project file (project.iml) and do a check out, I get "Error: Error: File ]]>\project.iml not found in StarTeam repository". If I create a directory under the project file location, and change the working path to this and do a checkout by right-klicking this new dir, nothing happens.

Can someone explain what I am doing wrong? What should i have as working path?

my configuration simplified:

location of project.iml:
c:/project/

Starteam settings:
Project: MyProject
View: myView
Working Path: c:/project/starteam

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