Just click on the .txt file in your project (in Visual Studio). Now look at the Properties window. You will find a property called Build Action. Switch that to None. Now you won't get that error. Then find the property called Copy to Output Directory and switch that to Copy If Newer. Now your project will copy that file to the Zune anytime you update it. That's it. No need for all the weird XML workarounds or junk like that.
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