The Solution File is not an MSBuild file

Yes it is you say. Well you can do this:

msbuild mysolution.sln

and it does work. It will build all of your solution but it is not a true MsBuild file in the MsBuild format. The MSBuild engine has special code to deal with them. What it is actually doing is transforming the solution into a MsBuild file and running that.

Before you run it try this at the command prompt:

Set MSBuildEmitSolution = 1

This sets a special environment variable that MSBuild checks, if its set then it emits a copy of the transformed solution. Open this up and you will see what is happening when your build your solution. Its not very complicated, mainly just a bunch of calls to the MSBUILD task for the projects in the solution.