I'm using the latest Visual Studio 2010, with C# 3.5 and my project is working fine on my machine.
I'm using SQLite for the database, and it's just a little .db file.
What's the best way for me to package this simple little application?
What is the preferred way to create a project that's setup for deployment?
I'm assuming that your app is to be run on a desktop - if that's not the case you'll have to clarify.
You need to add a setup & deployment project to your solution and configure it to install the build output from your application as well as whatever content you want (ie: your .db file) onto the end user's machine.
The process is fairly straightforward and there are TONS of tutorials online -- Google is your friend for nitty gritty details.
You can always use NSIS (from Nullsoft). Free and really a pleasure to work with. It comes with samples and tutorials and you will find a lot of info on Google.
You can deploy your app in a few minutes if you don't want too much installer customization.