Ok I have it! Should have used aspnet_compiler instead of msbuild. What you need to do is log onto your remote system and run the following (I stuck it into a .bat file).
C:/winnt/microsoft.net/framework/v2.0.50727/aspnet_compiler.exe -p c:\source web site -v /cstemp -u c:\target web site
where the source web site is your development (mysite dev) and target is your live or staging site. The -v switch is a temporary dir that it will use (and create and delete) and the -u means only compile the code files but leave the markup files in place - this is like vs2003 where you had a single dll in the /bin directory, .aspx file but no source.
After I run this I use xcopy to refresh the my production server from the staging area (target web site). Now I can edit remotely, save and run and then one bat file to build and copy.
-Kevin