I don't have the book so I don't know what the original instructions were, but I just created a quick test site with just the App_Code folder and it worked fine. Here's what I did:
1. Create a class that inherits BuildProvider in its own namespace in App_Code
2. Created an override for GenerateCode in that class
3. Added the provider to the web.config like this:
<add extension=".sample" type="MyNamespace.MyClassname" />
4. Created a .sample file
5. Fired up a second instance of Visual Studio and debugged the first one with the web site and the build provider.
6. As soon as I start running the site with the build provider, my breakpoint in GenerateCode gets hit.
So, it seems to work fine when using App_Code.
Are you using a Web Site Project or a Web Application Project? App_Code is not used in WAPs....