Recommended reading for you Silverlight junkies:
Good book for Silverlight Development: Pro Silverlight 4 in C#
I keep running into issues with Silverlight not thinking it is installed. I combined this with always have the consumer edition of Silverlight installed on and not the Developer edition.
Add to the fact that finding the Developer edition is near impossible unless you read the fine print on the Silverlight page.
Here is the link to download the Silverlight Developer Runtime from Microsoft. I put this here for my convenience more than anything.
You can also go here: http://www.silverlight.net/getstarted/ and hit CTRL + F and type windows developer runtime.
EDIT: I have noticed a large number of people hitting this page. Well, let me help you guys out a little more. It turns out that EVERY time Microsoft decides to update the Silverlight runtime. A patch, string change, someone looked at it wrong, the Developer runtime gets invalidated.
You will need to reinstall it each time. So make sure you keep it handy! Thanks Microsoft for such a wonder feature. I love reinstalling things every week.