Problem Resolved
It definitely has nothing to do with network access as no network access is performed in the VBP script. Also, you don't even have to run the script to see the problem. I have the exact same result in the command-line version. Also, nothing obvious showing up in Windows Event log. We've even disabled virus protection and set up exclusions -- all to no avail.
Yet it works great on our other machine (which is pretty much identical). The ONLY difference between the two machines is our Build machine has McAfee installed on it (with certain features disabled and various directories programs excluded). But as a test, I decided to uninstall it to see if anything would change. And wouldn't you know it -- IT WORKS FINE WITHOUT MCAFEE!!!
Thanks for making me re-think my assumptions.
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