I do suggest setting up a nightly build version. It is worlds better. It's been a while since I looked at RC2, but I have a couple of suggestings.
First, did you look in both the Project & Compiler settings (i.e. the global compiler setting and the project build options)? I can't remember if RC2 has these, but I felt it was worth mentioning.
As for the error, it's not really that odd, /W does reqiure an argument (for VC++ 2005: /Wall, /W1, /W2, /W3, /W4, /WL, /Wp64, /WX). My guess is that you have it set somewhere (maybe by default).
jmccay