Yes, .NET app will look GAC for the referenced dll first, if not, then look
into the same folder, then subfolder, or folder specified in app.config...

Place dll into GAC, does not make it appear in VS's "References" dialog box,
you need to modify a Windows Registry for this. Search the NET or MS KB
would lead you to how to do this. Actually, it is recommended you keep a
copy of the dll (exact version of the dll you placed into GAC) somewhere in
your local drive and set reference to it in your developing project. As
mentioned above, although your developing app has reference to the dll file
somewhere in your drive, the app always try to load it from GAC first.