Shan McArthur posted about some bugs in the MsBuild task when I select 'Publish' from the context menu using the Visual Studio extensions that are provided in the PDC Otober CTP.  This usually starts when I bring in certain references into the web project.  The error that I see in my output window is:

C:\Program Files (x86)\MSBuild\Microsoft\Cloud Service\v1.0\Microsoft.CloudService.targets(603,5): error MSB4018: The "CSPack" task failed unexpectedly.
System.IO.IsolatedStorage.IsolatedStorageException: Unable to determine the identity of domain.

Resolution: you can workaround the issue by using cspack from the command line.

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Hani did some research and found that in our use of types in the System.IO.Packaging namespace, there is a point in which the code switches to using IsolatedStorage (most likely based on memory consumption) and when that happens, we're failing due to the way that the AppDomain we're running in is setup.

In other words, it doesn't have to do with complex references but ultimately the size of the package being created, Jim