Hello, with Visual Studio 2005, you can create Silverlight 1.0 applications. Please download Silverlight 1.0 SDK. If you want to create Silverlight 2 applications, you'll need Visual Studio 2008. If you have troubles in installing VS 2005 SP1, you can post your question on the Visual Studio forum.
shanaolanxing - Please mark the posts as answers if they help and unmark if they don't.