I was able to resolve it, sharing it for everyone's benefit. The cause of the issue is that compilation is a 2 step process. The compiler first produces the dll, then attempts to sign it. See http://msdn.microsoft.com/en-us/library/yh7ks237(v=vs.90).aspx
The dll will still be there and one won't notice that its test signed until one attempts to load it. I had 1 sign file, xyz.snk which was locked in another thread.