"application has failed to start ... configuration is incorrect" after upgrading?

I had the same problem where my entire C# solution was created in previous version and it did not work in new VS.Net version giving the same error. Here are a few things that will help you resolve the problem

1. Expand the References Item and check if any item has a warning symbol attached to it.
2. If (1) , click on References->Add Reference and try to add the reference which has the warning. Now the warning sign has to go away.
3. If the references displayed in 'Add reference' dialog box is grayed, you should probably get the reason by hovering next to the reference.
4. For me it was grayed and it clearly mentioned that the component is not compatible with the current .NET Target runtime. Right click on Project -> 'Properties' and try to change the .NET Runtime and give a shot by compiling the entire solution and try to execute it.
5. If it still fails , try looking at eventviewer logs by going to Start->Run->Eventvwr
6. This should be a good way to debug this problem.