This last few days I have started getting back into MSBuild. At the end of last year I was colaborating with Loren Halvorson trying to make MSBuild part of our respective build processes. The idea was to carry on using Visual Studio .NET 2003, but to convert solution and project files to MSBuild before compiling. At the time the build files (.targets) that came with the PDC version of VS 2005 didn't support embedded resources, the MSBuild engine took a lot of coaxing to work with .NET 1.1 and there was no easy way to build C++ projects. In the end it all turned out to be a little too painful. Loren went on to use the NAnt <solution> task (which has matured a lot) and I went back to doing Visual Studio command line builds (the only way at the time to build C++ project files).
This last attempt turned out to be a lot more successful. I have been able to develop using VS 2005, build using MSBuild (and .NET 1.0), package using WiX and deploy on everything from VS 2002 and up! You can find the end results here.
I started writing up the steps involved to build a VS 2005 project for .NET 1.0. Unfortunately it still isn't as strait forward as it might be (fair enough as it isn't officialy supported yet). If people are interested, I'll write it up when I get back from holiday. Setting 'CscToolPath' and 'ResGenToolPath' is a good start...