As far as needing a designer goes - perhaps not, but in comparison to SWF, certainly. With SWF, you dragged-and-dropped standard Windows controls we all know and love to a form, did the bindings to event handlers, and that was the end of it.

XAML places a much larger burden on the developer. Sure, it gives you the ability to create more flexible layouts, but at a tremendous cost. You have to actively design your application's user interface from a much, much lower level up. .NET's biggest draw was the RAD factor, but with XAML/WPF, a lot of that for utilites and other smaller applications with GUIs was left behind. There's certainly nothing RAD-esque about WPF.

For instance, Windows 8 still ships their VB6 runtime from 1998.

Disclaimer: I work at Microsoft (and yes, I know you did too), but this claim is based on my perceptions and should not be considered a statement of fact.

As for the "shocking" backwards compatibility issues - they're very well documented. Compiling against .NET 2.0 in VS2010 gives you access to certain methods and overloads that were not present in the initial .NET 2.0 release, but were added in SP2 and SP3. Which is cool... What's not cool is that a) there is no official list of methods added between the SPs to the best of my knowledge (but I really could be wrong here!), and more importantly b) the resulting application which actually requires .NET 2.0 SP2/3 will run on .NET 2.0 RTM (for example), and you'll have ZERO indication that it's broken until during runtime when you try to call a particular method or overload that was not present in the version of the framework you're on, when you'll get some generic exception instead. Good luck figuring that one out from the anonymous crash dumps you'll receive by email.

A proper approach would have been the option to select which SP of the Framework you wish to compile against or at the very least, generate warnings during compile that your use of function X will CRASH on .NET 2.0 SP1, for example. That, and proper detection of out-of-date .NET runtimes (a la SxS - which while a real PITA at least makes sense) instead of silent, nasty runtime crashes when using mismatching versions.

Off the top of my head, I recall that the Auto/Manual reset event classes have either methods or overloads that were modified between SPs.