String str = "Data Source=E:\\mobile\\Mydatabase#1.sdf;Persist Security Info=False";
No it isn't.
Remember that the windows mobile emulator is just that: an emulator. What that means is that it pretends to be a genuine Windows Mobile device.
If it was a genuine Windows Mobile Device, could it access your hard drive?
At any time, rather then when it was docked?
No.
It can access storage cards and internal memory. But not your PC.
Put it in the emulators internal memory, or set up a storage card emulation on the emulator, and stick it in there. Then point the connection string at that. For example:
string str = @"Data Source=\Storage Card\PAAssociation\Membership\Details.sdf;Password=XXXXXXXXXXXXX;Persist Security Info=True";