There is no current support for Windows running on Edison.
However, it seems possible to hack it together. I'm not sure how you would get it to boot into Windows installer once you had the files on there. You could be first!
C#: barring getting Windows running on it, you could attempt to load one of the open source implementations onto Yocto. I would start here: http://www.codeproject.com/Articles/777108/Building-and-running-embedded-Linux-NET-applicatio
Developing an application that will work with sensor input. I assume this means the Arduino board. I notice there is an option for either Windows or OSX based development with the Arduino SDk. Can any Edison experts suggest the best path to take? What are the pros , cons for either?
yes, have a look at Edison - Software Downloads where you can find the Arduino SDK for either Windows or MacOS
Also, is C# an option with the Arduino board?
You may want to install the Mono packages from Index of /edison/repo/core2-32 which gives you C# support