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After running the Mono for Android installer on windows, Visual Studio will always package/deploy an android application using the Android SDK located at %HOME%\AppData\Local\Xamarin\MonoForAndroid.
This can be very confusing if the user had another installation of the SDK on their machine that has been added to their path. This causes (in VS) Tools -> Start Android Emulator Manager to open the SDK manager found in their %PATH% rather than the one that MfA uses in %HOME%\AppData.
Screenshot: http://screencast.com/t/xaAmOMM6 (This shows the SDK manager opened from Tool->Start Android Emulator Manager in VS)
I can confirm this issue.
However for me it appears to use "C:\Program Files (x86)\Android\android-sdk\" no matter what you specify in the field in the Visual Studio plugin. However, the package manager for the Android SDK will download to the path specified. It just won't package your program using this location.
This should be fixed in the 4.1 series. We unified the code used by the VS plugin and msbuild.