Just remember if you do as I have just done and upgrade from Visual Studio 2005 to 2008,  any projects that use SQL Compact will be automatically upgraded to reference SQL Compact 3.5

Of course this means that if your rolling out applications you have to install the SQL Compact 3.5 client cabs to your devices.

I followed this article to find the location of the new cab files -

http://msdn2.microsoft.com/en-us/library/13kw2t64.aspx

Interesting however,  it seems that I can sync just fine to .Net Compact Framework server tools 3.1.

For a full description of what works with what,  look at -

http://blogs.msdn.com/sqlservercompact/archive/2007/12/19/connectivity-cross-version-compatibility-sql-server-compact-3-5.aspx