Datacontext conflicts

Answer 1

In a UserControl like this you should never exlicitly set the DataContext to this or anyting else, because the DataContext is usually set externally when you use the UserControl somewhere in your application. The externally applied DataContext is typically (part of) the application's view model.

You should instead change your internal bindings so that they use an explicit RelativeSource:

<TextBlock
    Text="{Binding Path=Watermark,
                   RelativeSource={RelativeSource AncestorType=UserControl},
                   FallbackValue=This prompt dissappears as you type...}"
    Visibility="{Binding ElementName=txtUserEntry,
                         Path=Text.IsEmpty,
                         Converter={StaticResource BooleanToVisibilityConverter}}" />
<TextBox
    Name="txtUserEntry"
    Text="{Binding Path=Text,
                   UpdateSourceTrigger=PropertyChanged,
                   RelativeSource={RelativeSource AncestorType=UserControl}}" />

and then remove any DataContext assignment from the UserControl's constructor.

See e.g. this answer (and many other similar) that discuss this topic in detail.