Re: Offline Database storage
I don't know whether this would be useful to you but you might think about using the XML solution and then encrypting the XML file. I don't know about ADTG files so I don't know which would be easier, but the encryption option shouldn't be too difficult.
Re: Offline Database storage
There is also the possibility of using an Access database. You don't need to have Access installed to use an MDB file and there are some measures you can take to secure the file. You'd need to write code separate to that that's used for SQL Server, but it would be virtually the same. You would just be using System.Data.OleDb instead of System.Data.SqlClient.