Thanks for the info, I have 2.0 and it works partially, meaning that I can run the application, but I cannot save templates or XML files since I am missing the System.Core and System.Xml.Linq. I however believe that you are allowed to freely distribute these files with your application (although you'd probably need System, System.Xml and all the files containing assemblies that you used) as well.
I will try with 3.0 and see how it goes.
Could you maybe supply a sample output file? I'm craving such a modded raid window for quite some time, yet was too lazy to really get into the XSD of the UI.
EDIT: .NET 3.0 did not work