Attempting to specify a path to a dll or exe as an assembly reference is not possible; e.g.:

New-Item -Path dte:\solution\projects\myproj\references -name 'c:\dev\mydll.dll' -type assembly

The issue is that the file path specified in the -name parameter is interpreted by PowerShell as part of the item path, making the resulting item path:

dte:\solution\projects\myproj\references\c:\dev\mydll.dll

which isn't resolved by the StudioShell path processor (and oddly doesn't generate an error).

The fix should be to be able to specify the assembly path as the -value parameter.