App.Xaml must be in the project root folder
Fun WPF fact - your App.XAML file must be in the proj... just read the title.
I consider it "fun" because it haunted me for a couple of days: the combination of the crystal clear exception immediately after running the app (IOException Cannot locate resource 'YourWindowName.xaml'.) and my absolute confidence in the fact that the folder location was not a problem ("I saw it working after moving it to another folder! I'm sure of it!") created a fascinating combination.