What is the best practice to use data sets instead of an observable collection in MVVM to bind to grids. is it OK to have a property of type DataSet on the view model? How is the design time data set in this case?
One of the key concepts of the MVVM pattern is that the ViewModel is the "model of your view", it shapes your business model in such a way that it is easier to bind a UI (i.e. your View) to it.
You can certainly use a DataSet / DataTable to expose data from your ViewModel and bind it to your View. I don't see anything wrong with this approach. It is certainly valid MVVM!
Regarding design time data, it depends on how you are creating it. You cannot create a DataSet in XAML, so cannot use a XAML file within visual studio for your data. However, if you are programmatically creating design time data, i.e. within your ViewModel checking whether it is design-time, then creating data in your code, it will work just fine.
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