BDC metadata authoring can be a daunting task especially when we are so get used toVisual Studio’s IntelliSense. We can actually enable IntelliSense through these steps (in this case I’m using Visual Studio as my XML editor):
1. Open up the XML and click on the ellipsis in the Schemas property (bring up the property window)
2. XML Schemas window will open, click on Add
3. Navigate to BdcMetadata.xsd file, usually this file sits in: Program Files\Microsoft Office Servers\12.0\Bin folder
If you are authoring BDC metadata outside of Sharepoint Dev box, copy the xsd file out and refer to the location where you copied the file into. In my case, I like to leave my Sharepoint dev VPC running while doing some development on my Vista physical machine, so I copied the BdcMetadata.xsd file out of the VPC and put it on my physical machine.