Using namespaces in WCF service

Suppose I have this service:

================
namespace BillEntry
{
[ServiceContract(
Name = "BillEntryService",
Namespace = "http://BillEntry")]

interface IBillEntryService
{
[OperationContract]
void ProcessEntry (Employee[] list);
}

[DataContract(Namespace = "http://BillEntry")]
[KnownType(typeof(Manager))]
public class Employee
{
private int pk;
[DataMember]

public int Pk
{
get { return pk; }
set { pk = value; }
}
}

[DataContract(Namespace = "http://BillEntry")]
public class Manager : Employee
{
private int level;
public string Level
{
get { return level; }
set { level = value; }
}
}
}
=====================

I generate service proxy with 'n' option

/n:http://BillEntry, BillEntry

Two questions I don't understand here.

1. Why does svcutil generate TWO sets of Employee and Manager classes, one
set in the default namespace, second one in BillEntry namespace?

Second question is related to the first one, but this is where I stuck with
this:

One the client side, there are two sets of classes, in the default namespace
and in the BillEntry namespace, but ProcessEntry has Employee parameter
from BillEntry namespace

void ProcessEntry (BillEntry.Employee[] list)

so I have to create not Employee or Manager object but BillEntry.Employee
and BillEntry.Manager.

So far so good, everything compiles. However it fails on method call because
WCF expects
not 'BillEntry.Employee' but 'Employee'!


My first thought was to change [KnownType(typeof(Manager))]
to [KnownType(typeof(BillEntry.Manager))] but that didn't make any
difference

I don't know how can I fix this. I do need this 'BillEntry' namespace
generated by proxy so I can explicitly say 'BillEntry.Manager' versus just
'Manager', but I feel that I am doing something wrong here...

Another strange thing was that it was working fine, but then I changed
something in the service interface and svcutil began generating two sets of
classes, I had to change client code, it compiles, but blows up on this
method call....