It seems related to AV (realtime scan) actually...
I disabled the realtime scanning in MSSE and compiled the project three times with no problem at all.
I then enabled it and recompiled and boom- File Not Found.
I also noticed that the compilation time took twice(!) as long with realtime scanning enabled.
The IA process and project directories are now excluded from realtime scanning and the problem has, knock on wood, disappeared and compilation time is cut in half