C# error: Use of unassigned local variable

The compiler doesn't know that the Environment.Exit() is going to terminate the program; it just sees you executing a static method on a class. Just initialize queue to null when you declare it.

Queue queue = null;

The compiler doesn't know that Environment.Exit() does not return. Why not just "return" from Main()?

A couple of different ways to solve the problem:

Just replace Environment.Exit with return. The compiler knows that return ends the method, but doesn't know that Environment.Exit does.

static void Main(string[] args) {
    if(args.Length != 0) {
       if(Byte.TryParse(args[0], out maxSize))
         queue = new Queue(){MaxSize = maxSize};
       else
         return;
    } else {
       return;   
}

Of course, you can really only get away with that because you're using 0 as your exit code in all cases. Really, you should return an int instead of using Environment.Exit. For this particular case, this would be my preferred method

static int Main(string[] args) {
    if(args.Length != 0) {
       if(Byte.TryParse(args[0], out maxSize))
         queue = new Queue(){MaxSize = maxSize};
       else
         return 1;
    } else {
       return 2;
    }
}

Initialize queue to null, which is really just a compiler trick that says "I'll figure out my own uninitialized variables, thank you very much". It's a useful trick, but I don't like it in this case - you have too many if branches to easily check that you're doing it properly. If you really wanted to do it this way, something like this would be clearer:

static void Main(string[] args) {
  Byte maxSize;
  Queue queue = null;

  if(args.Length == 0 || !Byte.TryParse(args[0], out maxSize)) {
     Environment.Exit(0);
  }
  queue = new Queue(){MaxSize = maxSize};

  for(Byte j = 0; j < queue.MaxSize; j++)
    queue.Insert(j);
  for(Byte j = 0; j < queue.MaxSize; j++)
    Console.WriteLine(queue.Remove());
}

Add a return statement after Environment.Exit. Again, this is more of a compiler trick - but is slightly more legit IMO because it adds semantics for humans as well (though it'll keep you from that vaunted 100% code coverage)

static void Main(String[] args) {
  if(args.Length != 0) {
     if(Byte.TryParse(args[0], out maxSize)) {
        queue = new Queue(){MaxSize = maxSize};
     } else {
        Environment.Exit(0);
        return;
     }
  } else { 
     Environment.Exit(0);
     return;
  }

  for(Byte j = 0; j < queue.MaxSize; j++)
     queue.Insert(j);
  for(Byte j = 0; j < queue.MaxSize; j++)
     Console.WriteLine(queue.Remove());
}