I was facing a strange issue in Web Setup project project for one of my Automated Distribution Project (developed in VS2010). It was not behaving smoothly, syptoms seems to be undefined. Sometimes steup project build successfully when intially creaed. After a week or two when I used to build it agin then ‘error unable to update the dependencies of the project” used to occur.
After investigation, I reach a hot fix, microsoft provided for VS2010. Problem is solved after installing it.