The problem is caused because we are using a web application project instead of a website. When you upgrade through the Upgrade button of the Project Manager it replaces the SitefinityWebApp.csproj file in the root of the project. Changes to to project such as including new folders, etc. are stored in this file. You can backup your csproj file before upgrade and then use a merge tool such as WinMerge to merge differences in the csproj files.
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