Microsoft explains that “If you create a ASP.NET 2.0-based web app in Visual Studio. And you’ve .NET Framework 2.0 installed on computer. You create a templated ASP.NET web user control (.ascx file). You create a web form that uses a server control to support the templated user control. For e.g., you use Repeater control to include user control. You use inline data-binding expressions to specify the property for user control. In the design view, on Tools menu, you click Generate Local Resource to generate a local resource for Web app. You create a ASP.NET 2.0-based web app in VS. In this scenario, you find that the inline data-binding expressions disappear after you switch to source view.”
The issue occurs because of an error in System.design.dll in .NET Framework 2.0.. Note This issue also exists in Visual Studio 2010. Even if you use VS2010 to target ASP.NET 3.5, you may encounter this issue because System.design.dll version 4.0 is used in that scenario.
The hotfix is available but doesn’t apply to VS2010.