Hello Nick,
Thanks for posting! Based on the following MSDN documentation,
http://msdn.microsoft.com/en-us/library/z17ceyya.aspx
"In the Advanced Security Settings dialog box, the Debug this application
with the selected permission set check box is selected and disabled. This
is because Debug In Zone cannot be turned off for browser-hosted
applications."
So, as to a converted XBAP application, it is by designed that that option
selected and disabled in the new version of Visual Studio 2008. That blog
may talk something about a previous version. Or, it is just wrong. By the
way, if we ignore this step, does it convert correctly?
About converting WPF client application to Web based application topic,
you
can find some discussions from the internet,
http://social.msdn.microsoft.com/forums/en-US/wpf/thread/ef66f6a7-eb9d-42f6-
86ba-7fbefb72fa95/
http://channel9.msdn.com/forums/TechOff/199192-converting-wpf-standalone-app
lication-to-XBAP/
If you need future help on this, I think maybe trying in official WPF
forum
is a better because the WPF forum is more appropriate for this question,
http://social.msdn.microsoft.com/forums/en-US/wpf/threads/
Best regards,
Ji Zhou
Microsoft Online Community Support