Basically this is how its done:
string line = sr.ReadLine();
QuickFix42.MessageFactory fac = new QuickFix42.MessageFactory();
QuickFix.MsgType msgType = QuickFix.Message.identifyType(line);
QuickFix.Message message = fac.create("", msgType.getObject() as string);
message.setString(line, false);
The factory creates the proper message type once its given, so in this case since the type was {X}, QuickFix.Message message is a pointer to MarketDataIncrementalRefresh and then message.setString sets the rest of the props from the given string.