First off, try this to get the error:
If that doesn't help, you could try to send me the shapefile and I'll play with it. Send me a message via codeplex with your email if you want to go that route. I'm guessing the file is probably small enough to fit on an email.
MapWinGIS.Shapefile shapefile1 = new MapWinGIS.Shapefile();
shapefile1.Open(@"c:\shapes\grid100.shp", null);
MapWinGIS.Shapefile result = shapefile1.SimplifyLines(1.00, false);
MessageBox.Show(shapefile1.get_ErrorMsg(shapefile1.LastErrorCode));
Secondly, you could try a bigger tolerance. Try using 10 (or even 100) to see if the result is different.If that doesn't help, you could try to send me the shapefile and I'll play with it. Send me a message via codeplex with your email if you want to go that route. I'm guessing the file is probably small enough to fit on an email.