I don't personally think Silverlight should fail, because Flash needs a competitor. Without competition there is no product development which brings benefits to users and developers.
However, I think Silverlight will fail, because developers capable of doing interactive animated applications and websites are mostly using Flash or Flex and they will never switch.
There are also other reasons why Silverlight will fail. Number of basic controls is too low and default styles are ugly and unpolished. There aren't any good applications for user interface development. Blend is a joke. It just sucks. Visual Studio is not for design, it is an IDE for manual coding.
Although Silverlight is still in beta, it feels like being pre-alpha.
Microsoft will push it with optional Windows Updates for every XP and Vista computer but it is already hated. Flash is hated too, but Silverlight is from user's point of view a similar technology which enables annoying ads, catches user input disabling browser key commands when focus is on Silverlight app instead of browser window, consumes bandwith, doesn't work on mobile devices and requires a plugin which you propably can't install on corporate environment because you don't have admin privileges and home users just aren't interested or they don't know what is to be installed and how to do it. I think there will soon be browser add-ons designed to block Silverlight content.
I've been developing some Silverlight apps for myself and there has not been a single day when I haven't cursed this "flash-killer" into the depths of Hell. I am more an user interface designer than a coder and in some way I like writing XAML "by hand" but styling of controls has been made too difficult. I have a strong HTML+CSS background and of course there may be some false expectations on how things work there, but still I find the way Silverlight controls and templates are styled really poor. Blend generates bad XAML (too complex code, margins which override each other together with canvas.top or canvas.left values etc) or views your styling accurately in its design view but when ran in a browser you get something else. It almost feels like generating HTML with FrontPage which is a total disaster as any WYSIWYG editor.
The whole Silverlight seems like being on very early pre beta level which isn't surprise because the technology is new. Maybe I'll check it again when it has reached version 3 or 4 if there ever will be any progress.