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Smart Device Development

Visual Studio 2010 does not support mobile application development for versions of Windows Phone prior to Windows Phone OS 7.0.

For information about using Visual Studio 2010 to create applications for Windows Phone OS 7.0, see Windows Phone Development and Silverlight for Windows Phone.

For Visual Studio 2008 mobile developers, Microsoft released the Windows Mobile 6.5 Developer Tool Kit, which works with the Windows Mobile 6 SDK.

Because Visual Studio 2010 does not support mobile application development for Windows Phone prior to Windows Phone OS 7.0, you cannot use the following features: .NET Compact Framework projects, Visual C++ device projects, smart device CAB projects, Device Emulator and Device Emulator Manager, testing tools for device projects, and Device Security Manager.

Mobile application development is still supported in earlier versions of Visual Studio, such as Visual Studio 2008. For more information about smart device projects, see Windows Mobile Developer Center and Smart Device Development in Visual Studio 2008

NoteNote

Visual Studio also supports a different kind of device development known as Mobile Web development with ASP.NET. Mobile Web development refers to the development of mobile Web applications that run on a Web server and are rendered in different formats on a variety of browser-equipped mobile devices. For more information about Mobile Web development, see ASP.NET Web Sites for Mobile Devices.

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Replacement for windows CE?
XP embedded? $0because Windows Mobile, Windows 8, Windows Phone 7 don't share the same purpose with WinCE as a RTOS.$0 $0So, if there is a replacement plan, MS should announce it, or else dev will move away from WinCE.$0
Microsoft Connect: No support for Windows CE and Compact Framework development in VS2010
Wiki feedback comments are meant to help improve the documentation.

if you dislike Microsoft's decisions about CompactFramework and its Vs2010 compatibility go to MicrosoftConnect topic:$0 http://goo.gl/Z1Qeu
Connect item
Add your support to the following Connect item:

http://connect.microsoft.com/VisualStudio/feedback/details/595712/no-support-for-windows-ce-and-compact-framework-development-in-vs2010

Currently 3rd highest voted suggestion, that should tell MS all they need to know !
Customer Feedback on this Topic
A number of comments have been posted here expressing dissatisfaction with the decision not to include support for Windows Mobile 6.x and Windows CE in Visual Studio 2010. The Visual Studio Documentation team monitors wiki feedback comments to help improve the documentation. Since the comments were related to a product decision rather than to the documentation, we have forwarded them to the product team, and removed the comments from this page. To make comments related to these decisions in a forum that will directly reach the Visual Studio product team, please use the Microsoft Connect site, http://connect.microsoft.com/VisualStudio. Comments logged on Connect are automatically sent to the product units.
No mobile support for VS2010? .... it's coming slowly
Just to stir the pot .... http://www.microsoft.com/presspass/features/2010/jun10/06-17EnterpriseHandheld.mspx

As I have been reading various blogs about how MS "has abandoned" .NET Compact Framework or Win CE based development I thought this link might help shed some additional light on the topic.