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Here is the setup. I have a SQL Server database that i need to query. I want to display the information in a Telerik/Devexpress chart control on either an application or site page.
Here is what i was thinking about doing and then those who know better can correct me :)

Create a library dll that has a service with methods that (using the entity framework) return a variety of IEnumerable types. Use an application page with the chart control. In the code behind use the service and bind the data to the chart control.

Any help/ideas on how i should actually do this in Sharepoint Foundation 2010 is very much appreciated.

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I would simply create a SharePoint Web Part or SharePoint Application Page that would use the Telerik control just like any other .NET application would. In the code behind of the page, query your SQL database to provide the data to the control.

There are many resources on how to create web parts and application pages. Here is a collection of great videos on web parts:

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In addition to what John has already recommended.. I suggest you store configurations such as database connection sting somewhere manageable in SharePoint (rather than in a web.config) such as in a SPPersistedObject (…).. This will make your app more flexible and configurable across different environments.. – Zeb May 2 '12 at 20:36

You may want to consider the BCS feature for database access within your SharePoint setup. Here are a few links that may be helpful -

UPDATE: Learning videos from the SharePoint Developer Center - Accessing External Data with Business Connectivity Services in SharePoint 2010

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