If you want to use LINQ to Entities (AKA ADO.NET Entity Framework) with your SQL CE database, download and install SQL CE SP1 Beta (see link below).
Uninstall SQL Compact Edition 3.5 that you have right now, but leave Design Tools. And then install those 2 files downloaded from MS Downloads Center.
Here is the link: http://www.microsoft.com/downloads/details.aspx?FamilyID=68539FAE-CF03-4C3B-AEDA-769CC205FE5F&displaylang=en
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