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When calling 'msbuild' in a directory (without specifying the target item), MSBuild does the following:
If only one solution or project file is in the current directory, automatically select it as the build item.
If there multiple items, "error MSB1011: Specify which project or solution file to use because this folder contains more than one project or solution file."
If there is no item: "error MSB1003: Specify a project or a solution file. The current working directory does not contain a project or solution file."
I can happily hack on this if you guys want.
We deprecated xbuild and recommend using msbuild instead. Switching to msbuild will also most likely resolve the issue you reported.