1) Uninstall SQL Server 2005 Compact Edition (SSCE)
2) Uninstall SSCE SDK
3) Uninsall SSCE SP1 Tools
4) Run setup from your Visual Studio 2005 CD
5) Click Change or remove
6) Add or Remove Features
7) Uncheck Smart Device Programability
8) Click Update
9) Repeat steps 4-8 except this time Check Smart Device Programability
10) Install SQL Server 2005 Compact Edition (SSCE)
11) Install SSCE SDK
12) Install SSCE SP1 Tools