I have the opposite problem. I installed TeamCity 3.0.1 on a 2003 64 bit server that had the .Net64 bit framework installed. I had configured my asp.net to use the 64 bit framework. (There are some reg keys you have to modify)
After setting up the project in TeamCity and attempting the build, team city used the 64 bit framework; however I needed the 32bit. I have reset the registry to point the framework to the 32bit, however there must be a property setting in TeamCity which has stored the path to the framework, because it is trying to use the 64bit framework to launch msbuild.
This is an output from the log "C:\WIN\Microsoft.NET\Framework64\v2.0.50727\MSBuild.exe'"

My question is where is the setting in TeamCity for the path to msbuild and how do I change it.

please try setting environment variable 'MSBuild' with path to the right version of MSBuild. It could be done at the agent machine using buildAgent.properties file, or system environment as well as on the server using build configuration's environment settings. The last way allows you to use TeamCity substitutions, i.e. %system.DotNetFramework2.0%

I'm hitting this issue now and I'm wondering what settings I need to update to get TeamCity to use the 64 bit build environment if I use the sln2008 runner.

The problem I'm hitting is that if I open a 32 bit visual studio command line and try to use msbuild on our solution it crashes on some of the mixed projects. If I open up the 64 bit visual studio command line it builds all the way through.

This is on a machine running Vista 64 and TeamCity 4.0.2.

TeamCity enforces Solution 2008 runner to use 32 bit version of MSBuild.
You can add env.MSBuild=<path to msbuild exe for 64bit .NET> to buildAgent.properties file.
On the other hand you may add an environment variable MSBuild to you build configuration.

MSBuild runner contains configuration chooser. You may try using MSBuild runner instead of solution2008 build runner.