ASP.NET / C# - Can't use SQL Server CE in VS2012

ASP.NET / C# - Can't use SQL Server CE in VS2012

I'm developing a web application and was trying to use a local database
file to store some information. However, when I add the .sdf file, I get
an error. Below are some screenshots detailing my problem.
I've been trying to figure what's wrong for several hours. I've seen
similar issues, but have yet to find a fix. I used to be able to use
SqlServerCe connections before with .sdf files, though that was a
different development environment. I have tried reinstalling everything
SQL several times, including downloading everything I could find on MSDN.
Can anyone help me out?
Below is my Solution Explorer View. I've just added Database1.sdf to the
project.

I get an error as soon as I add it:

If I try to open the .sdf file, I get this error:

Here is my list of references:

And, finally, all of the relevant SQL-related installations on my local
machine: