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Could I draw your attention to http://silverlight.net/forums/t/3491.aspx - same issue
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Additionally the error I get when trying to build the solution (with bad ref's) is "The Silverlight framework is not installed"
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Come on MVP's tell us how to fix this!
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I doubt it will be OS based - hope not anyhow!
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I am experiencing the same - spookily I can run the silverlight demo site (http://www.microsoft.com/silverlight/default_ns.aspx#0_0) in FireFox but not in I.E.
Did you find a resolution to this issue at all?