After developing a WPF application without Source Control, I decided to add the solution to TFS.
After doing so whenever I opened the main window.xaml file in Design
There is an hot-fix available from Microsoft: Microsoft Connect. I found this link on this blog.
This fix solved the problem after a restart for me.
The problem was caused by a Visual Studio add-in named, "Power Commands for Visual Studio 2008".
After uninstalling them and restarting Visual Studio, the design view for xaml files began working normally.