You can create .sdf files with SQL Server 2008 Management Studio. In the File > Connect Object Explorer dialog, change the Server Type dropdown to SQL Server Compact Edition. Then in the Database File dropdown choose New Database…. and you’re ready to go.
Yes, SQL Server Compact has been deprecated (see the comments on this Connect item). You should be using SQL Server Express or SQL LocalDB. Some posts: http://blogs.msdn.com/b/sqlexpress/archive/2011/07/12/introducing-localdb-a-better-sql-express.aspx http://blogs.msdn.com/b/jerrynixon/archive/2012/02/26/sql-express-v-localdb-v-sql-compact-edition.aspx http://erikej.blogspot.com/2011/01/comparison-of-sql-server-compact-4-and.html http://erikej.blogspot.com/2012/07/the-state-and-near-future-of-sql-server.html