It is a very popular misconception that adding an assembly to the GAC will enable it to show up in a project's Add Reference dialog in Visual Studio. Unfortunately, and to the chagrin of many, this is not true. This myth is perpetuated every time we install a third party component or library, it shows up in the GAC, and we can then add it from the Add Reference dialog.
But there is something else going on under the covers. The Add Reference dialog is path-based, meaning it uses physical paths on the file system, retrieved from the registry. The root key is:
HKEY_CURRENT_USER\SOFTWARE\Microsoft\.NETFramework\AssemblyFolders\