Chris,
I can't explain this. MSBuild is case INsensitive and I just double checked this exact kind of expression on my machine and it works no matter what the file case. Can you triple check you haven't got a typo somewhere?
What happens if you create a little project with it outside the target ,eg
<Project xmlns="http://schemas.microsoft.com/developer/msbuild/2003" ToolsVersion="3.5">
<PropertyGroup>
<StoredProceduresPath>c:\whateveryourpathis</StoredProceduresPath>
</PropertyGroup>
<ItemGroup>
<StoredProcedures Include="$(StoredProceduresPath)\**\*.sql"/>
</ItemGroup>
<Target Name="test" >
<Message Text="@(StoredProcedures)"/>
</Target>
</Project>
Dan