I found a way but it's rather a work around.
The solution is not to try to localize your controls from XAML, but instead from your behind code.
For example, you define a Button
in XAML as follows:
<Button Name="MyButton" />
And then in your partial class
behind you set the content of the button programatically as follows:
MyButton.Content = MyLocalizedStrings.Hello;
Of course, in this example you would have a resource file called "MyLocalizedStrings.resx" in your project with a string named "Hello" in it.
This approach solves the problem. The only down side is that you won't be able to see a preview of the localized XAML in the Visual Studio XAML window.