Ok I did an xcopy deployment and it started working. So I removed all of the extra files from the xcopy deployment one at a time trying to find the file that was messing me up. I got the file structure exactly the same and it was still working.
Next I compared each file and they were all the same. Except the dll for the web project itself. That file was 2 kb smaller in the project that wasnt working. So I looked to see what my compile configuration was and it was set to release. I changed it to debug and it started working.
I then switched from the sample application to our application and did the same thing. It also worked. I am now able to move forward but the issue is not completely resolved.
I think I have got it about as narrow of a scope as I can. Using xcopy or web deploy if the project is built in release mode it fails but if it is built in debug it works.
Can you reproduce that?