A few months ago the XmlTeam teased us with some screenshots and screencasts of a newly redesigned XSD Designer for Visual Studio 2008. It's unclear if this will make it into RTM or if it'll be a quick download/add-in, but regardless today they released CTP1 of the XML Schema Designer (download).
The original schema design surface was more DataSet focused and it would sometimes mess with your Schemas. It was clear (to me at least) that it was schizophrenic to have on designer taking on double duty, especially as folks are making more and more complex Schemas. Here's a books.xsd schema I use for examples, loaded into VS 2008 with the new Schema Explorer on the right.
Also, a tip when writing Xml Schemas in Visual Studio...don't forget to right-click and hit Insert Snippet. The XSD Editor includes a metric butt-load of XSD-specific snippets that are worth using.
Scott Hanselman is a former professor, former Chief Architect in finance, now speaker, consultant, father, diabetic, and Microsoft employee. I am a failed stand-up comic, a cornrower, and a book author.
Disclaimer: The opinions expressed herein are my own personal opinions and do not represent my employer's view in any way.