Resolution:
Steps to add the custom properties for an adapter instance using Edit Adpater XML in Designer 5.0.1:

For example, If you want to add &ltzapconnection>...</zapconnection> properties into your SDK Adapter configuration You need to do the following:

1. Select the adapter Instance  and click Edit Adapter XML.
2. Scroll all the way down and locate element  "</AESDK:adapter>" and then add your custom properties just before this tag.
   (Note:If the adpater instance already has some custom  properties then you would need to add the custom properties just before the tag </generic:adapter>.)

&ltAESDK:adapter> OR &ltgeneric:adapter>
.......
.......
&ltzapconnection>
    &lthostname&gtrio</hostname>
    &ltport&gt9900</port>
    &ltinstance&gtUIJ23</instance>
</zapconnection>
<!--Any other custom properties goes here with appropriate begin and close tags-->
</AESDK:adapter> OR </generic:adapter>

3.Click OK and Save.

Note: Please follow the above steps instead of steps described in Chapter 11 of Adapter SDK Programmer's Guide release 5.0.1. Document will be corrected in future releases.