SQL Server Compact Toolbox Not Connecting to Databases

I am using SQL Server Compact Toolbox for runtime 3.5.

When I select 'Add SQL Server Compact 3.5 Connection' I get what you can see in the following image. The problem is that after clicking 'Test Connection' and 'OK' nothing happens. The list on the left does not have the database I am connecting to.

The database you can see there, 3.sdf is an empty database I created using the 'Create' button. That is the only database I have been able to connect to.

I have tried running the compact toolbox application as administrator, but that didn't seem to help. Also tried playing with the file permissions in the database folder, that didn't seem to help either.

This is what I have installed on my machine,

Update:

Yes I am using the latest version 3.1.4.0.

So the exact steps are this,

1. Right click SQL Server Compact Data Connections
2. Click Add SQL Server Compact 3.5 Connection
3. Click browse and select the filename, for me it is C:\temp1\1.sdf
4. Edit the Max database size in MB field. Set it to 500
5. Hit Test Connection. Nothing happens which is the first sign of an issue
6. Hit OK. The dialog disappears and the new connection does not appear in the list

I think 1.sdf is not a SQL Server Compact 3.5 file, and for some reason you get no error message (it has been fixed in version 3.5.1.0). You can use the "Detect SQL Server Compact file version" menu option to verify.