It has to do with the way you have your build file constructed. The source and destination can't be the same because the application builder attempts to copy the dll into the build directory-which causes the error.
To fix the problem, create a directory containing the dlls you will be using in the build. Specify the dlls in this directory as the source file. Next, after adding all the dlls to the project, click on the "Custom Destinations..." button and for each of the dlls you've added, specify the "Windows System Directory" as the destination WITH NO RELATIVE PATH.
The build should now work...
Mike...