Although it is possible, it isn't as simple and easy to get going as it is with Orcas / Visual Studio 2008.

Take a look at a few posts out there:
http://silverlight.net/forums/t/370.aspx
http://blogs.sqlxml.org/bryantlikes/archive/2007/05/02/silverlight-hello-world-in-c-from-vs-2005.aspx

 I also posted a little earlier today with a few tips as well: http://blogs.msdn.com/jeffwilcox/archive/2007/06/19/silverlight-v1-1-authoring-and-debugging-tips.aspx

-Jeff