I had from a totaly different reason the same notice "Value does not fall within the expected range" from the Visual studio 2008 while trying to use the: Tools -> Windows Embedded Silverlight Tools -> Update Silverlight For Windows Embedded Project.
After spending many ohurs I found out that the problem was that there wasn't a resource file and the update tool looks for the .RC file
Therefor the solution is to add to the resource folder a .RC file and than it works perfectly. I hope it will help someone out there