This is a useful article when converting a custom workflow project from Visual Studio 2008 to Visual Studio 2010:
In a nutshell,
Go ahead with the conversion wizard
Add a new Project (2010 Sequential Workflow Project) to the solution
Rename the Workflow1 folder to the new name – Very Important, you have to keep this folder in order for the workflow to be in the feature, so just rename it.
Copy the old workflow.cs file to the new folder in the new project. This will bring over the designer file and rules file (if applicable).
Delete the worflow1.cs
Copy over all other files that are not related to packaging such as Utility classes.
Copy default namespaces to new project. Check your default namespaces, namespaces in Elements.xml, assembly versions
Update namespace in new project on the .cs file, and .designer.cs file.
Compile, if does not compile, may have to remove Office reference in [...]