I'm having trouble using ILMerge in my post-build after upgrading from .NET 3.5/Visual Studio 2008 to .NET 4/Visual Studio 2010. I have a Solution with several projects whose target framework is set to ".NET Framework 4". I use the following ILMerge command to merge the individual project DLLs into a single DLL:

if not $(ConfigurationName) == Debug
  if exist "C:\Program Files (x86)\Microsoft\ILMerge\ILMerge.exe"
    "C:\Program Files (x86)\Microsoft\ILMerge\ILMerge.exe"
      /lib:"C:\Windows\Microsoft.NET\Framework64\v4.0.30319"
      /lib:"C:\Program Files (x86)\Microsoft Visual Studio 10.0\Common7\IDE\PublicAssemblies"
      /keyfile:"$(SolutionDir)$(SolutionName).snk"
      /targetplatform:v4
      /out:"$(SolutionDir)bin\development\$(SolutionName).dll"
      "$(SolutionDir)Connection\$(OutDir)Connection.dll"
      ...other project DLLs...
      /xmldocs 

If I leave off specifying the location of the .NET 4 framework directory, I get an "Unresolved assembly reference not allowed: System" error from ILMerge. If I leave off specifying the location of the MSTest directory, I get an "Unresolved assembly reference not allowed: Microsoft.VisualStudio.QualityTools.UnitTestFramework" error.

The ILMerge command above works and produces a DLL. When I reference that DLL in another .NET 4 C# project, however, and try to use code within it, I get the following warning:

The primary reference "MyILMergedDLL" could not be resolved because it has an indirect dependency on the .NET Framework assembly "mscorlib, Version=4.0, Culture=neutral, PublicKeyToken=b77a5c561934e089" which has a higher version "4.0.65535.65535" than the version "4.0.0.0" in the current target framework.

If I then remove the /targetplatform:v4 flag and try to use MyILMergedDLL.dll, I get the following error:

The type 'System.Xml.Serialization.IXmlSerializable' is defined in an assembly that is not referenced. You must add a reference to assembly 'System.Xml, Version=4.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089'.

It doesn't seem like I should have to do that. Whoever uses my MyILMergedDLL.dll API should not have to add references to whatever libraries it references. How can I get around this?