just wondering if it is possible to create a sharepoint workflow project in visual studio 2010 and doing development without a local sharepoint server installed?
working with sharepoint 2010
This is indeed possible, here is a quick reference guide based on this thread (posting as an answer since I cannot add comments yet).
Build & create .wsp-solution for non-SharePoint environments:
Go to a SharePoint 2010 server.
Open Regedit and locate the node "HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Shared Tools\Web Server Extensions\14.0"
Right-click and export the node to a file.
Copy that file into your dev. environment, right-click and choose "Merge" (select "yes" in the security warning dialog).
Install the "Visual Studio 2010 SharePoint Power Tools" onto your development environment. http://visualstudiogallery.msdn.microsoft.com/8e602a8c-6714-4549-9e95-f3700344b0d9
Start Visual Studio in your development environment and open/create a project based on a SharePoint template (if new project, enter a dummy url when asked for the Sharepoint site location).
In order for the solution to build/compile, you will have to copy the Microsoft.SharePoint.dll (& possible the Microsoft.SharePoint.Security.dll) from the [hive-path]\ISAPI folder on a Sharepoint server, and add them as references in your Visual Studio projects.
You should now be able to select "Package" (right-click the project in Solution Explorer), this will create the .wsp-file for you in the [solution path]\bin[debug/release] folder.