>>Your web is a Web Application project so you should have the references node in the Solution Explorer. Just expand that and make sure the System.Data.Entity is in there for both your biz object projects and your web project.
>>Tim
>
>Yes, I have it referenced in both the Business object project and the web project.

In case you didnt' get that yet, paste this in the assemblies section of your web.config.

<add assembly="System.Data.Entity, Version=3.5.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089"/>