licenses not working properly.

Yes, otherwise the build machine will not have any licensing information to compile into the application. However when you install on the build machine, choose the bare minimum options (no GAC assemblies, no documentation, no samples, etc.) so that just the assemblies are put in the program files folder. This will also install the licensing data so that your builds work.

Which installation should be used on the build machine?
Also If i am using the my release installation can i use my developer license information?

Use the same installer and license info as what you put on your developer machine. We license by developer, and don't require extra licenses to be purchased for build machines.

I have installed the WPF studio on the build machine. When i am creating the installer it shows only for 2 dll [ActiproSoftware.PropertyGrid.Wpf30.dll, ActiproSoftware.Shared.Wpf30.dll] as depenedency found, however it is missing dependency for 'ActiproSoftware.Gauge.Wpf30.dll' . Can please provide solution for this?

Please clarify, all the assemblies are installed to the folder indicated in the Actipro WPF Studio installer (the default folder is also indicated in the readme file). Where exactly are you having trouble?