Really detailed description of your process. Thanks for sharing!
I believe you can set up TFS to have gated check-in on a single branch, which if you can setup on trunk would make sure that the merges built successfully. That could trigger msbuild, if you can get that working or a custom build job.
If you can get that working then you'd be able to use that trunk code as the artifact to send to Deployment Manager. That avoids having to assemble the files for deployment through the TFS change sets, as you'd be confident that the trunk could always build.
Are you using Deployment Manager to deploy the database from source control as well as the application?
That could be a way to further automate the process. SQL Source Control and SQL CI allow you to source control the structure of a database, keep a database up to date on each check-in, and run database unit tests. They also produce database packages for Deployment Manager, so you can deploy a release that contains both the application and the database.
If you want to send me the command you're using in step 4 to deploy the release using Deployment Manager I can help out with that. The commands I use are:
DeploymentManager.exe --create-release --server=http://localhost:81 --project="Project Name" --apiKey=XXXXXXXXXXX--version=1.1
DeploymentManager.exe --deploy-release --server=http://localhost:81 --project="Project Name" --apiKey=XXXXXXXXXXX--version=1.1 --deployto=CI-Environment-Name
That will create a release version 1.1 using the latest available packages for that project. You can optionally specify the package to be used when creating the release with
--packageversion=<package name>=<version>
--packageversion="application=1.5