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1) The Make VS.NET action will only Rebuild, then Build when incrementing versions.
2) It is Visual Studio (msbuild/vcbuild/devenv) that actually performs the building of a VS solution or project (and is reporting the error), not VBP itself. If building via MSBuild does not work, you might try using devenv (enter devenv in the Override field on the Options tab), as this will be closer to what the IDE does when building. Another option might be to not increment the assembly version or use VS version update logic (set the assembly version to 1.0.*).
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