dotnet watch crashes net10.0 Azure Functions project with FileNotFoundException

[KristianJakubik]

Describe the bug

Running an Azure Functions (isolated worker) project targeting net10.0 under dotnet watch crashes immediately on startup with the System.IO.FileNotFoundException: Could not load file or assembly 'System.Runtime, Version=10.0.0.0 exception.

The same project running against net8 works fine.

Steps to reproduce

1. Create an Azure Functions isolated-worker project targeting net10.0.
2. Have Azure Functions Core Tools installed, where func.exe runs on .NET 8 (func --version: ).
3. Run the project with dotnet watch
4. Observe an immediate exception

Expected behavior

dotnet watch runs without exception for net10 function app.

Actual behavior

dotnet watch fails with an exception:

Unhandled exception. System.IO.FileNotFoundException: Could not load file or assembly 'System.Runtime, Version=10.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a'. The system cannot find the file specified.
File name: 'System.Runtime, Version=10.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a'
   at System.Reflection.RuntimeAssembly.GetTypeCore(QCallAssembly assembly, String typeName, ReadOnlySpan`1 nestedTypeNames, Int32 nestedTypeNamesLength, ObjectHandleOnStack retType)
   at System.Reflection.RuntimeAssembly.GetTypeCore(String typeName, ReadOnlySpan`1 nestedTypeNames, Boolean throwOnError, Boolean ignoreCase)
   at System.Reflection.TypeNameParser.GetType(String typeName, ReadOnlySpan`1 nestedTypeNames, String assemblyNameIfAny)
   at System.Reflection.TypeNameParser.Parse()
   at System.Reflection.TypeNameParser.GetType(String typeName, Boolean throwOnError, Boolean ignoreCase, Assembly topLevelAssembly)
   at System.StartupHookProvider.CallStartupHook(StartupHookNameOrPath startupHook)
   at System.StartupHookProvider.ProcessStartupHooks(String diagnosticStartupHooks)

Is this a regression?

When changing the target framework to net8, dotnet watch seems to be working as expected.

Are there any workarounds?

No response

dotnet --info output

.NET SDK:
 Version:           10.0.301
 Commit:            96856fd726
 Workload version:  10.0.300-manifests.6fc1bb7b
 MSBuild version:   18.6.4+96856fd72

Runtime Environment:
 OS Name:     Windows
 OS Version:  10.0.26200
 OS Platform: Windows
 RID:         win-x64
 Base Path:   C:\Program Files\dotnet\sdk\10.0.301\

.NET workloads installed:
There are no installed workloads to display.
Configured to use workload sets when installing new manifests.
No workload sets are installed. Run "dotnet workload restore" to install a workload set.

Host:
  Version:      10.0.9
  Architecture: x64
  Commit:       901ca94124

.NET SDKs installed:
  10.0.300 [C:\Program Files\dotnet\sdk]
  10.0.301 [C:\Program Files\dotnet\sdk]

.NET runtimes installed:
  Microsoft.AspNetCore.App 8.0.27 [C:\Program Files\dotnet\shared\Microsoft.AspNetCore.App]
  Microsoft.AspNetCore.App 9.0.16 [C:\Program Files\dotnet\shared\Microsoft.AspNetCore.App]
  Microsoft.AspNetCore.App 10.0.8 [C:\Program Files\dotnet\shared\Microsoft.AspNetCore.App]
  Microsoft.AspNetCore.App 10.0.9 [C:\Program Files\dotnet\shared\Microsoft.AspNetCore.App]
  Microsoft.NETCore.App 8.0.27 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.NETCore.App 8.0.28 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.NETCore.App 9.0.16 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.NETCore.App 9.0.17 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.NETCore.App 10.0.8 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.NETCore.App 10.0.9 [C:\Program Files\dotnet\shared\Microsoft.NETCore.App]
  Microsoft.WindowsDesktop.App 8.0.27 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]
  Microsoft.WindowsDesktop.App 8.0.28 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]
  Microsoft.WindowsDesktop.App 9.0.16 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]
  Microsoft.WindowsDesktop.App 9.0.17 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]
  Microsoft.WindowsDesktop.App 10.0.8 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]
  Microsoft.WindowsDesktop.App 10.0.9 [C:\Program Files\dotnet\shared\Microsoft.WindowsDesktop.App]

IDE version

No response

Other details

func -v
4.12.0

Just a note:
I first encountered this when running aspire run with "defaultWatchEnabled": "true" - my Azure Functions services failed to start with that setting on. I narrowed the cause down to the dotnet watch command.