Deploy windows form c# with local database

• 1)how could i prevent users from seeing these source files?
  
• Ans: Try the below tool to prevent the block decompilation of dll

http://arunendapally.com/post/protect-your-source-code-from-decompiling-or-reverse-engineering

• 2)is this way of publishing (put every thing in debug or release folder for installation of end user) correct?

Ans: After making the setup you don't need to do any thing but only on that case if you have included all the component like third party dll, images, your local database etc while making setup.

• 3)should i directly put MDF and LDF files or have to do a some work of securing them like compiling into irreversible format that only application can use it not anyone else??

Ans: yes either simply put the MDF file in a secure place or keep it with project but make it password protected.

• 4)should i do something in the process of creation of database in visual studio to prevent any one accessing it except software itself?

Yes just by making your DB password protected and always put password in your app.config in encrypted.

• 5)am i missing a concept in the way of publishing an application with local database?

No you have done in a right way