MSBuildExtensionsPath32 not set correctly?

MSBuildExtensionsPath32 is set internally by MSBuild. (BuildEngine.BuildPropertyGroup.SetExtensionsPathProperties)

But you could override it by setting an environment variable.

SET MSBuildExtensionsPath="C:\Program Files\MSBuild"

Or you could override the value in your project file :

<PropertyGroup>
  <MSBuildExtensionsPath>C:\Users\madgnome\Desktop\msbuild</MSBuildExtensionsPath>

  <!-- It works too with relative path -->
  <!--<MSBuildExtensionsPath>..\msbuild</MSBuildExtensionsPath>-->
</PropertyGroup>

<Import Project="$(MSBuildBinPath)\Microsoft.CSharp.targets" />
<Import Project="$(MSBuildExtensionsPath)\Microsoft\VisualStudio\v10.0\WebApplications\Microsoft.WebApplication.targets" />