Yea, I'm a little slow... But I just came accross a "need" for something just like this and found VistaDB. Should fit the bill perfect. Details:
VistaDB 2.1 database for .NET has been released!
This 2.1 update includes over 60 improvements, including new support for .NET 2.0 and Visual Studio 2005 VistaDB is a small-footprint, embedded SQL database alternative to Jet/Access, MSDE and SQL Server Express 2005 that enables developers to build .NET 1.1 and .NET 2.0 applications. Features SQL-92 support, small 500KB embedded footprint, free 2-User VistaDB Server for remote TCP/IP data access, royalty free distribution for both embedded and server, Copy 'n Go! deployment, managed ADO.NET Provider, data management and data migration tools. Free trial is available for download.
Learn more about VistaDB
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