I emailed the coordinator of LINQ to XSD (ulger) to ask if the project was dead.
Here is his response:
"It's great to hear you're interested in LINQ to XSD. Unfortunately we do not have the resources to address the issues at the moment. The reason we put it on codeplex is to allow community to access the sources so that they can fix the issues themselves
and/or contribute to it. Please feel free to take it and change it as you wish."
So, this project needs talented people from the community to step forward and develop it, or it will forever remain incomplete.
There are other projects out there with similar functionality (e.g., Xsd2Code), but LINQ to XSD has the potential to be a much stronger tool. See this blog post from Scott Hanselman for more details on the value of LINQ to XSD: http://www.hanselman.com/blog/LINQToEverythingLINQToXSDAddsMoreLINQiness.aspx