Hello Randall Kohltfarber,
Thank you for contacting me.
Excuse me for the misunderstanding. I just wanted to specify that when using a relative path, it is pointing to the executable directory for the application (not the root directory of Visual Studio where devenv.exe is located). You can easily check this if you copy the application exe file from bin\Debug to another directory and execute it.
For example, I have set the relative path to "..\..\Resources\NewTheme.xml" and run the project - in debug mode it can retrieve the theme. After that, I have copied the assembly to c:\ and executed it. It threw an exception with this message: "Error loading theme from resource System.IO.DirectoryNotFoundException: Could not find a part of the path 'C:\Resources\NewTheme.xml'..." You can see that the path is the application executing directory, which in this case is c:\.
I'd like to add that you could use the "~" sign to denote the application executable path. For example: "~\Resources\NewTheme.xml". instead of "..\..\Resources\NewTheme.xml".
If you need additional information do not hesitate to write me.
the Telerik team