From http://forums.asp.net/t/1944241.aspx?Website+publish+failing+due+to+file+path+being+too+long
Add the following line in default PropertyGroup of web project file.
<IntermediateOutputPath>..\Temp\</IntermediateOutputPath>
You can likely make the above path C:\temp or ……\Temp (as needed to get it as close to root of the drive as possible.
In my case, there was no .csproj or .vbproj (website project file) but there was a website.publishproj file that warns you not to edit it, but I did anyway, and it did the trick.