It is one of the re-curring things in my Windows CE trainings.
Every time participants export an emulator image together with the SDK this works fine, but the emulator will not boot when the SDK is installed on an application developers machine.
The reson for this is that often KITL is included for debugging puposes when creating the image. Unfortunately this transport is not used by Visual Studio as its debugging transport layer. Visual Studio uses DMA and it seems that both technologies not really work well together (there only can be one, aka Highlander syndrom ).
Therefore, if You want to create an SDK remove KITL from the image configuration and You or respectively the application developer using the SDK will be fine.