R – Silverlight 3: Merged Resource Dictionary – from non-embedded file

Check out the pack URI syntax. You want something like this:

<ResourceDictionary Source="pack://application:,,,/YourAssembly;component/Subfolder/YourResourceFile.xaml"/>

Answered a similar question here earlier, see Adding a Merged Dictionary to a Merged Dictionary question.

This is an optimization bug, see Microsoft Connect / DefaultStyleKey style not found in inner MergedDictionaries:

On the creation of every object in XAML, if a default style is present (i.e. style w/ a key of Type) that style should be applied. As you can imagine there are several performance optimizations to make that (implied) lookup a light weight as possible. One of them is that we don’t look inside Resource Dictionaries unless they are flagged as “containing default Styles”. There is a bug: if all your default styles are nested in merged dictionaries three levels deep (or deeper) the top dictionary does not get flagged so the search skips it. The work around is to put a default Style to something, anything, in the root Dictionary.

So adding a dummy style to the root dictionary fixes this. Example

<Application x:Class="MyApp.App"  
             xmlns="http://schemas.microsoft.com/winfx/2006/xaml/presentation"  
             xmlns:x="http://schemas.microsoft.com/winfx/2006/xaml">  
    <Application.Resources> 
        <ResourceDictionary> 
            <ResourceDictionary.MergedDictionaries> 
                <ResourceDictionary 
                    Source="/CommonLibraryWpfThemes;component/Themes/Generic.xaml" /> 
                </ResourceDictionary.MergedDictionaries> 
            <!-- Dummy Style, anything you won't use goes --> 
            <Style TargetType="{x:Type Rectangle}" /> 
        </ResourceDictionary> 
    </Application.Resources> 
</Application>