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I would like to use EF CTP5 code first approach with a windowsform application.
The application needs to be redistributed. Could I save the database in a file so that the users do not need to have MS-SQL server installed?
Or do I need to include a redistributable package of MS-SQL server express during the installation?
You can use EF Code First to access a SQL Server Compact database, which is a very small version of Microsoft SQL Server. It has the benefit of not requiring an installation, databases can be created and managed solely through the .NET API.
This version does have some limitations, such as only allowing connections from a single process–however overall it sounds likely to be a very good candidate for your scenario.