@kettch: I too agree that the datetime data and all the handling of that datetime data should be in a single thing, even the UI in a perfect world. But that harkens back to the pipe dream of everyone speaking a common language. It isn't going to happen in my lifetime.
Yes localization should happen at the boundry with the user as really that is its purpose.
We are currently using 3.5.1. We would love to use 4.5 but there are complexities with some 3rd party dependencies that aren't 4.5 capable. The datetimeoffset from the DB all the way to the UI would be great from what I've read (although in practice I'm not sure how much better than UTC it would be). Unfortunately we have to support back to SQL Server 2005. 2008 was the first version to include that datatype.