[This question is similar to this one, but I am also interested in the possibility of a sandbox.]
I am considering embedding a scripting language in my C#/.NET appli
You can load te script into a different AppDomain and control the permissions of the second AppDomain.
This link should get you started:
http://blogs.msdn.com/shawnfa/archive/2005/08/08/449050.aspx
I have used Powershell as a scripting language on windows myself and found it to be very useful, and if you are familiar with .NET then its all the more easier.
Download a two page reference document here, this is all you will need to get started.
But yes you can use .NET System.IO namespace to perform IO operations via Powershell
same posted # this link