If it works on XP Pro, you can make it work on XPE. My question would be
"why?". Typically, XPE systems are for running embedded apps - not
developing them.
Sometimes it nice to be able to debug on a target machine that has all the
PCI cards installed that we use, and sometimes not everyone has a extra PC
to install VS 2005 and use the remote debugger
Although I completely agree with Gordon's point that it is not really necessary to install VS on XPe device and for debugging
embedded apps (well, any app on embedded device can be considered as embedded app) it would be a better option to use remote
debugging, I had a successful attempt to install VS 2005 on XPProEmulation image (www.xpefiles.com, FP2007/CTP2).
It was a default trial install (not Full) and the studio, IDE, SQL Express, compilers, linkers ande user mode debugger worked ok.
And again, it was done on XPProEmulation image which obviously doesn't miss any software component.
Remote debugging .NET apps can be a bit of a pain to setup. Yes, you can
install VS 2005 on XPe. My XPproSP2 component from my book
(http://www.sjjmicro.com/XPES.html) contains all the necessary components.