The BaseUrl property in the .testsettings file is not respected during execution via the VS2012 Test Explorer.  

Outer Exception Type: System.UriFormatException
     Message: Unable to resolve the passed uri '/html/tryit.asp?filename=tryhtml_links' to an absolute url.
     HRESULT: 0x80131537 (Official ID (if app.) = COR_E_FORMAT, Error Bit = FAILED, Facility = FACILITY_URT, Code = 5431)
     Call Stack:
          at ArtOfTest.WebAii.Core.Browser.BuildUrl(Uri passedUrl, Boolean useDecodedUrl)
          at ArtOfTest.WebAii.Core.Browser.InternalNavigateTo(Uri uri, Boolean useDecodedUrl)
          at ArtOfTest.WebAii.Core.Browser.NavigateTo(Uri uri, Boolean useDecodedUrl)
          at ArtOfTest.WebAii.Core.Browser.NavigateTo(String url, Boolean useDecodedUrl)
          at ArtOfTest.WebAii.Design.IntrinsicTranslators.Descriptors.NavigateToActionDescriptor.Execute(Browser browser)
          at ArtOfTest.WebAii.Design.Extensibility.HtmlActionDescriptor.Execute(IAutomationHost autoHost)
          at ArtOfTest.WebAii.Design.Execution.ExecutionEngine.ExecuteStep(Int32 order)

Here's a video demonstrating the issue.
http://screencast.com/t/3s7z6anuk