The criteria used to wrap an entity is whether you need additional properties and/or methods specifically for the UI. UI logic never belongs on the entity itself. The entity is a data container for your business data. It models your business not the UI. It's the responsiblity of a ViewModel to provide UI logic around your entities. So, in TempHire, for the addresses and phone numbers, I need a property to enable/disable the Delete button next to each item in the UI based on the state of the entity. This is pure UI logic and therefore the entity is wrapped in an ItemViewModel.
The following is the property for the AddressItemViewModel. It only enables the Delete button if there's more than one address and the current address is not the primary address.
public bool CanDelete
{
get { return !Item.Primary && (Item.StaffingResource.Addresses.Count > 1); }
}
which is then bound to the IsEnabled attribute of the Button.
<Button Width="60"
Height="25"
Margin="2"
HorizontalAlignment="Left"
cal:Message.Attach="Delete($dataContext)"
Content="Delete"
IsEnabled="{Binding CanDelete}" />