Hi Bill,
It looks like your web application was simply in use whenever you went to deploy and (as such) the .application file couldn't be overwritten or cleared.
I would definitely recommend precompiling your application rather than just deploying it as is (which is what it looks like you are doing.) This should not only resovle the issue you are having, but will make your web application run much faster.
To precompile, you will add a call to aspnet_compiler.exe within the post-build of your project. Aspnet_compiler.exe is distributed with .net and can be set to clear out the destination directory before deploying, not to mention the greater benefit of making your web application run a lot faster. There is a ton of info out there about using aspnet_compiler.exe out on msdn and elsewhere.
Here is an example of a typical call to aspnet_compiler.exe in the post build of one of our web projects:
"C:\Windows\Microsoft.NET\Framework\v2.0.50727\aspnet_compiler.exe" /p "$(SolutionDir)YourWebsite" /v / /f //127.0.0.1/c$/Inetpub/YourWebsite
The /p specifies the path to your solution, the /v identifies the virtual directory for the destination, and the /f signifies that the destination should be cleared before deployment.
Hope it helps 
,
Dustin