First Questions Answer...
Server=.\SQLExpress;AttachDbFilename=C:\MyFolder\MyDataFile.mdf;Database=dbname;
Trusted_Connection=Yes;
Second Questions Answer...
I played around with the target framework and figured it out that SQL Server 2008 developer and express is not compatible with .Net framework 4.5 and higher... The solution is to set the target framework of the application I am developing to .Net Framework 3.5.