I believe it's a known problem, you need to add this to your project file, <RunWixToolsOutOfProc>true</RunWixToolsOutOfProc>, check this post for additional info WiX 3.7 with vs2008 <http://windows-installer-xml-wix-toolset.687559.n2.nabble.com/Wix-3-7-Woes-with-VS2008-td7582558.html>
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