AdditionalReferencePaths can/will screw up your Team Build

Just spent several days pondering over a Team Build that only builds the first time after a thorough clean of the build directory. Prelimenary conclusion is as follows:

It seems like the AdditionalReferencePaths option is given a higher priority than the framework itself. This leads to resolving things like System.dll from the output path instead of from the relevant target framework(!!).

The reason I started thinking this is that the it was obvious from the build log that our output path was beeing preferred for stuff like System.dll, System.Data.dll etc. We are deliberately not using CopyLocal and simultaneously have set all our $(Output) to one directory. All file references are picked up from this folder.

I tested out this conclusion by simply removing the one AdditionalReferencePaths inclusion we had and it did the trick.

Now, this preference of AdditionalReferencePaths over target framework path cannot be a good descicion from MS can it?