How do I pass a property to MSBuild via command line that could be parsed into an item group?

You’ve escaped the semicolons, preventing MSBuild from parsing them as individual items. Run like this instead, with quotes,

msbuild [myscript] /p:build_configurations="test5;test6;test7"

you will get the following output,

Running with args: test5
Running with args: test6
Running with args: test7