Are you trying to open the file on your computer in this line, from the WP7 emulator?
StreamReader sr = new StreamReader(@"D:\abc.txt");
You will definitely not be able to do this from the phone, as the applications are isolated from each other for security reasons.
, , , System.Windows.Application.GetResourceStream:
var resource = System.Windows.Application.GetResourceStream(new Uri("textfile.txt", UriKind.Relative)
. .