The type or namespace name 'dynamic' could not be found
Is your website in IIS configured to use .NET 2.0 ? That's what it sounds like to me. Check the configuration first.. does your test work locally ?
Your compiler should look like this:
<compiler language="c#;cs;csharp" extension=".cs" warningLevel="4" type="Microsoft.CSharp.CSharpCodeProvider, System, Version=4.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089">
Yours is set to Version=2.0.0.0