>Subclass is required by me at design time mostly. Now how can I hide as well as allow subclass at design time. In any case when the project is compiled it will start looking for the parent class libs. How can this be countered.
>
>Please advise.

I put my common classlibs in _Common subdirectory of my Projects directory. It is imprtant to preserve relative location of application files and parent class library because VCX store parent classlib as relative path.
Then I can subclass my common classes as usually. When I compile my project used common class libraries will be automatically added to project. No problem - I just exclude them from compilation (right click on classlibrary -> Exclude) and recompile application again.
Before adding to distribution package I remove source code from common VCX files. I have hand-writeen utility to do so and call it from setup compiler NSIS.
On user PC my intaller installs common libs to ..Program Files\MyCompany\_Common and my applications to ..Program Files\MyCompany\MyApp. The user cannot change this. This is needed to preserve relative location of application and common class libraries as I described above.
Thats all. Now, if I change something in common classes I'm able to update them without rebuilding and distributing my applications.