I strongly disagree with the concept that the Model should not implement the INotifyPropertyChanged. This interface is not UI specific! It simply informs of a change. Indeed, WPF heavily uses this to identify changes, but that doesn't mean it is an UI interface.
I would compare it to the following comment: "A tire is a car accessory". Sure it is, but bikes, buses, etc. also use it. In summary, do not take that interface as an UI thing.
Having said that, it doesn't necessarily mean I believe that the Model should be providing notifications. In fact, as a rule of thumb, the model should not implement this interface, unless it is necessary. In most cases where no server data is pushed to the client app, the model can be stale. But if listening to financial market data, then I do not see why the model cannot implement the interface. As an example, what if I have non-UI logic such as a service that when it receives a Bid or Ask price for a given value it issues an alert (ex. through an email) or places an order? This could be a possible clean solution.
However, there are different ways of achieving things, but I would always argue in favor of simplicity and avoid redundancy.
What is better? Defining events on a collection or property changes on the view model and propagating it to the model or having the view intrinsically update the model (through the view model)?
The bottom line whenever you see someone claiming that "you can't do this or that" it is a sign they do not know what they are talking about.
It really depends on your case and in fact MVVM is a framework with lots of issues and I am yet to see a common implementation of MVVM across the board.
I wish I had more time to explain the many flavors of MVVM and some solutions to common problems - mostly provided by other developers, but I guess I will have to do it another time.
As it turns out, the situation above was a bit of a red herring. What was happening was that I was binding from a textbox to the model, and from the model to another textbox. If I updated the model directly, it wouldn't work without implementing INotifyPropertyChanged.
As for the 2-way binding, I think you just have to live with that if you're using this method. If you don't want that, just bite the bullet and use the 'Passive View' style of MVP.
Best Answer
I have been working for a few months on a rather large windows forms app, and we are using DataBinding and INotifyPropertyChanged for everything. It works really well, and I have no real problems to report. We are using our own classes, because there really isn't a data layer in this application, so I don't know for sure about the MS data classes.