Lately I've been getting the error message :
error MSB4018: Microsoft.Build.Shared.InternalErrorException: MSB0001: Internal MSBuild Error: xsd.exe unexpectedly not a rooted path
... while I've been building a project that uses that task in a pre-build step to generate code from XSDs. After googling around a little bit, I found the solution on this page. The gist of it was that xsd.exe wasn't in the PATH variable, and therefore Visual Studio couldn't find it. If anybody else has this problem, add this folder to your PATH:
C:\Program Files (x86)\Microsoft SDKs\Windows\v7.0A\Bin\NETFX 4.0 Tools
... or your system's equivalent, wherever the XSD.exe tool is stored on your system.