Silverlight 1.0 or 1.1? Also, if you're working with the RTM of Visual Web Developer 2008, they haven't released Tools that work with the RTM yet. You can get the Silverlight 1.0 project template working but it takes a little work:
http://adoguy.com/2007/09/02/Installing_Silverlight_1_0_Templates_on_Visual_Studio_2008_Beta_2_(Orcas).aspx
(If this has answered your question, please "Mark as Answer")
Shawn Wildermuth
C# MVP, MCSD, Speaker and Author
Silverlight 2 Workshop
May 12-14, 2008 - Atlanta, GA
May 28-30, 2008 - San Francisco, CA
http://www.silverlight-tour.com