I ran into an issue earlier when trying to return an entity class through a web service for use in an AJAX page. After some quick research, I came across a post by Darren Neimke that referenced Rick Strahl's post about LINQ to SQL and Serialization
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Read the complete post at http://feeds.feedburner.com/~r/JasonNGaylord/~3/308292155/a-circular-reference-was-detected-while-serializing-an-object-of-type-xxx.aspx