I think that you may have misunderstood what Never Copy means. If you're using |DataDirectory| then you want the database in the same folder as the EXE and that will never happen if you select Never Copy. The most appropriate option in most cases is Copy If Newer. That way you will always have a database in your output folder but it will not get overwritten, thereby losing the changes you made during testing, unless you make a change to the original.

The reason Microsoft warn about that option is that you don't actually have to change the data or schema in the original database to change the data file, thereby prompting a copy on the next build. Simply opening the file can be enough. Given that Always Copy overwrites your data every time, the occasional overwrit eis not a big deal. Copy If Newer should have been the default because it's what most people want and that's what you should use.

Dealing with local data files is quite easy. If you're using SQL Server Express or SQL Server CE then you add the data file directly to the project using the IDE. If you're using Access or something else then you just let that program create the data file where it wants and use Add Existing Item to add the data file to the project, in which case it will be copied to the source folder and you can ignore or delete the original. You then select the data file in the Solution Explorer and change Always Copy to Copy If Newer.