By default SQL CE doesn’t run under IIS. The original plan was for the license to disallow this. There has been quite a bit of discussion about this restriction and it look like the powers that be listened. While still not fully supported there is at least a step in the right direction by enabling the product to run, previously it actively prevented you from doing so.
By doing an: AppDomain.CurrentDomain.SetData(“SQLServerEverywhereUnderWebHosting”, true)
the product will work. As it still is a single user database there are some things to watch out for but if you are in a position to do so this might be jus what the doctor ordered
See Steve Laskers blog post for the full story.