You should ignore this file (solution.xml). It is only used internally by the VSeWSS tool. Here are more details:
1) The source code for the project was created using a tool called the Visual Studio Extensions for Windows SharePoint Services version 1.0, sometimes referred to as VSeWSS 1.0. This tool was created by Microsoft and at the time of the writing of the book, it was the recommended best practice for creating SharePoint solutions. Since that time, the tool has undergone many revisions and works quite differently now than it did then. One of the reasons for the revisions is that many developers did not like the way it worked. Specifically, they did not like the fact that it generated several "hidden" files that contain literal values which are needed by SharePoint in order to deploy the solution. Also, they did not like the fact that once you created a project using the tool, it was difficult to move the project to another system that did not also have the same version of the tool installed.
2) The file you are looking at is not part of the Visual Studio project itself. It is just an internal file that is created by VSeWSS 1.0 to control how it generates the code files which ARE included in the project. The fact that the solution.xml file contains elements that appear to be related to SharePoint is only a coincidence. It is not based on any SharePoint schema. It is essentially a settings file that is used only by VSeWSS. You should not even try to decipher the contents of this file, because it is irrelevant to the source code itself. It is generated on the fly by VSeWSS and is rewritten every time you make changes to the project properties and save the solution.
3) The reason the file is included in the code download is because it is needed by VSeWSS. When the book was written, there were no published plans to extend the VSeWSS tool. The assumption was that readers would download and install the tool themselves before attempting to build the code on their own machines. Microsoft has since changed their strategy, and has released several new versions of the tool. However, projects created using the previous version are not compatible with the newer versions. If you want to build the project today, and especially since you are trying to build it using Visual Studio 2008, then I suggest that instead of trying to import and build the project directly in VS2008, you first extract the essential code components and create a brand new project of your own. These elements are the "feature.xml" and other code files, which are located in the "ProposalManager\bin\Debug\solution" folder.
John F. Holliday, Author, MOSS MVP