I need to build a scripting interface for my C# program that does system level testing of embedded firmware.
My application contains libraries to fully interact with
You may want to look at Boo, another managed language that runs on the CLR, and which is particularly well suited to build DSL and make your applications scriptable.
The compilation pipeline is directly extensible from the language itself.
Reading the Boo Manifesto is a good starting point if you want to learn more about it.
[Edit] I forgot to mention that Ayende Rahien is writing a complete book on the topic: Building Domain Specific Languages in Boo