PaulS:
When the list is complete, everything gets copied to one directory, and compiled there. There are no paths involved in the build process.
Paul, yes I agree to this fact. I've seen the temp folder and know what are in it. What I was saying in my OP was that not every file copied to the same temp folder had the right -I option for g++ to even compile. The linker comes in after everything compiles but not everything is compiled when arduino IDE tells g++ to compile without proper header path.