This is related to VS Ultimate 2012 Update 3.
When XBAP application is debugged, it launches in Chrome even though IE is set as default browser. This has been launched as a bug : http://connect.microsoft.com/VisualStudio/feedback/details/800038/xbap-is-launching-in-chrome-while-debugging.
In Chrome, the *.xbap file is downloaded instead of opening and if this *.xbap file is opened from downloaded location it fails to launch the application as it could not find the manifest file in the downloaded location.
If XBAP application is started without debugging, it opens in IE and works fine.
RDV
