(GNU Emacs 23.0.60.1 (i386-mingw-nt5.1.2600) of 2008-08-29 on LENNART-69DE564)

Well, for me, its a bug in vc90 (aka MS VisualC++ Express 2008)
which is reporting the error as being in file tolower(filename) rather then filename.

in the mean time, I found out that the following does what I want:

(defun filepath-transform-build-to-src (filepath)
(progn
(setq result (replace-regexp-in-string "\\\\build\\\\" "\\\\src\\\\" result))
(setq result (expand-file-name result))
(setq result (convert-standard-filename result))
(setq result (file-truename result))
result
)
)

(setq compilation-parse-errors-filename-function
'filepath-transform-build-to-src)