Compact Framework applications can not use Windows Forms DLLs. What it most likely happening here is that either you are directly referencing a desktop assembly, or you are through a dependency. That is causing Visual Studio to detect that it needs the desktop framework DLLs, which it then tries to push to the device. Since these files are quite large, it's running out of space (though even if it had space, it would fail to run).
You need to go back to your project and remove all references to any desktop assemblies or to assemblies that might in turn reference them.