Publishing a ZIP package does not succeed and breaks subsequent publish attempts

**NB: This issue was not reproducible up until 20.04.2018. We noticed this issue happening from 25.04.2018.**

When a function app is created (via Azure Portal or with ARM template deployment) initially the publishing from VS2017 succeeds with no worries. If we then try to publish a ZIP package, it fails and it causes all subsequent publish attempts to fail. We tried different approaches to publishing the ZIP package: msdeploy, ZIP push url and msdeploy extension within the deployment template. All of them seem to fail with similar error: internal server IO error saying that it is not able to create/access some directories. At this point if we connect via FTP client, we are able to freely modify the file/dir structure and upload all required contents. If we than again try to publish (ZIP or through VS2017), we again receive the same error.
In all these cases when the publish process fails with IO error, we see that (1) all prior existing files and directories have been deleted (which is correct) and (2) only some files and directories uploaded. It seems that the error happens in the middle of file upload process.

#### Investigative information
- Timestamp: 25.04.2018 - 27.04.2018
- Function App version: 1.0
- Function App name: CustomerEventsQueueProcessor-events-customer001
- Function name(s) (as appropriate): EventQueueProcessor
- Region: West Europe

#### Repro steps and Actual behavior
1. Create a Function App hosted under Consumption plan
A) through Azure Portal
OR B) using template deployment
2. Try to publish the contents through VS2017. This should succeed
3. Try to publish a ZIP package
A) Use ZIP PUSH DEPLOYMENT as described here https://docs.microsoft.com/en-us/azure/azure-functions/deployment-zip-push
OR B) use msdeploy CMD tool
OR C) use MSDeploy extension resource within the ARM template of the Function App with a URL to the ZIP in an Azure Storage Account
4. The publish process fails with the following error respectively, but some files and folders were published:
A) Internal Server Error 503 Service Unavailable
OR B) The remote server responded with a generic 500 Internal Server Error
OR C) 403 Forbidden Response with an Inner Exception message saying "System.IO.DirectoryNotFoundException: Could not find a part of the path 'D:\home\site\wwwroot\bin\runtimes\osx\"
5. Trying to publish from VS2017 **without** deleting existing files results in this error: "An error was encountered when processing operation 'Create Directory' on 'D:\home\site\wwwroot\bin\runtimes'"

#### Expected behavior
Publish of a ZIP package to succeed and not break subsequent publish attempts.

#### Known workarounds
Publish app content without ZIP-ing it

#### Related information
* Programming language used: C# .NET 461
* Bindings used: Queue Trigger bound with:
public static async Task Run(
[QueueTrigger("%PullQueueName%", Connection = "StorageConnectionString")]
CloudQueueMessage queueMessage, ILogger log)

Start by reproducing the ZIP, msdeploy, and VS2017 publishing sequence for a Consumption-plan Function App, then compare the reported 503, 500, and directory errors. No file or test is named; done means ZIP publishing succeeds and later publish attempts continue to work without manually restoring the file structure.

Written by the indexing model from the issue text.