I have an C# library file that uses a web-service reference in it. I have referenced Microsoft SOAP type library v3.0 and use Visual studio 2008. When I create a set up project, I get an error that says mssoap30.dll and msxml4.dll have dependancies that have not been determined automatically and the set up procedure fails.
What is the reason and how to go about this ?
While this isn't exactly related to your problem, you should consider to drop that libraries.
You don't need that to access webservices in C#. You should be able to right-click your project, to add a webservice reference and it will create managed proxy classes to access your service.
I imagine you would have to include the redistributable in your setup process to make things work.
You should really consider just adding a service reference or a web reference and use the generated proxy class. As it says on the download page:
The Microsoft SOAP Toolkit is deprecated by the .NET Framework. SOAP Toolkit support will be retired in March 31, 2005. Extended support will retire in March 31, 2008.