Ok. The answer to the question is Yes and No.
YES if you just use over a service and pass back results
NO if you want to sync on the server and copy the sdf for use on the device.
See my updates at the end of this post:http://social.microsoft.com/Forums/en-US/syncdevdiscussions/thread/a2580bed-e606-4174-a075-2822f1939113/?prof=required