I'm writing this knowing there's another topic like this to be found here the answer provided however does not make much sense to me and whatever I tried doesn't seem to work so I'm seeking clarification.

The situation is as follows:
* New CRM 2011 toolkit solution
* New project added for Xaml workflow
* Adding CRM "Workflow" activity causes error

The error:

It shows a redbox "Could not generate view for Workflow"

The Exception:

System.Reflection.TargetInvocationException: Exception has been thrown by the target of an invocation. ---> System.IO.IOException: Cannot locate resource 'workflowdesigner.xaml'

I have VS 2012 SP2 with the latest (June) CRM SDK Toolkit installed. I did a clean install of the toolkit so it's not "upgraded" to prevent any old assemblies being referenced. I tried the things from the referenced question and moved the assemblies over and also re-referenced the latest assemblies to make sure everything works fine. I also tried downloading a workflow XAML created in CRM and opening but it gives the same error. I also opened the "example" workflow XAML solution in the SDK, again same result.