Dean,
Verify that the SQL Compact for windows component was deployed correctly to the GeoXT. AXF files are built on SqlCE so if the components are not correctly installed, ArcPad will not know how to read them, resulting in the folder\red circle icon you are seeing. Check the Remove Progams list on your unit for three entries starting with "Microsoft SQL Server 2005 Compact Edition....". If they are not listed, they were not installed so you will need to go back and deploy them. If you do see them or not all of them are listed, it's possible something went wrong during the initial deployment and\or they have since become corrupt. In this case you will need to uninstall all three components (or the ones listed) and redeploy them to the unit.