I need to build a scripting interface for my C# program that does system level testing of embedded firmware.
My application contains libraries to fully interact with
You may want to look at Boo, another managed language that runs on the CLR, and which is particularly well suited to build DSL and make your applications scriptable.
The compilation pipeline is directly extensible from the language itself.
Reading the Boo Manifesto is a good starting point if you want to learn more about it.
[Edit] I forgot to mention that Ayende Rahien is writing a complete book on the topic: Building Domain Specific Languages in Boo
You could just use C# itself as the scripting language as described here CrowsProgramming - Runtime Scripting in .Net
It might be worth considering PowerShell for this sort of task. That can call into .Net just as any of the DLR languages, and has a more natural language type chunking for tasks in its cmdlet (command-let) concept. You have to write the cmdlets in a compiled language at v1 -- in v2 which is being rolled out starting with Win7 and working to older releases in the next few months (v2 for Vista/Win2k8 is at RC now), you can build those in PowerShell directly.
Irony could also be a good candidate here. Here is an example which creates animation for the given image on the fly.
Set camera size: 400 by 300 pixels.
Set camera position: 100, 100.
Move 200 pixels right.
Move 100 pixels up.
Move 250 pixels left.
Move 50 pixels down.
The tutorial for creating such DSL is here:Writing Your First Domain Specific Language
It is an old tutorial but the author still maintains his library here: Github Irony
I agree with Marc G, though it's worth mentioning that the general concept is a Domain Specific Langugage. While IronRuby/IronPython aren't strictly domain-specific, they are full-featured and it would leave you to get on with your implementation.
Visual Studio has the DSL tools, and there's the 'M' Grammar stuff you can look into.
But yeah, IronPython.
I've heard very good things about IronPython for exactly this type of scenario. I'd certainly risk spending a few hours on a quick proof-of-concept, to see how it pans out.
Michael Foord will happily wax lyrical about the success of IronPython in similar cases (most specifically for him, for spreadsheet savvy users), and his book covers (IIRC) a few pointers about hosting it from .NET.