I use monodevelop to create my c# applications etc and just noticed that if you want to have more references to assemblies like System.Xml then you will have to add them via the GUI.
For example, if you get the error.
Description=The type or namespace name `Xml' does not exist in the namespace `System'. Are you missing an assembly reference?(CS0234)
then you will need to add the System.Xml assembly reference into the GUI solutions manager to compile in that assembly.
If you goto Solutions box -> References -> (Right click) Edit References. In the packages tab scroll down in the list and find the System.Xml and add it to the solution. Compile again and it will work :).. well you may get other errors but at least this one is sorted.
If you do not have the Solutions box, goto the main monodevelop menu View -> Solution.