According to the ts&cs on http://www.microsoft.com/silverlight/license-mac-dev.aspx and http://www.microsoft.com/silverlight/license-win-dev.aspx it says

TIME-SENSITIVE SOFTWARE. The software will stop running on November 1, 2007. You will not receive any other notice. You may not be able to access data used with the software when it stops running.

(or August 1st for the former).

It still seems to be working on my machine but there do seem to be reports of expiry on the web and my colleagues are reluctant to install the software because of this. Any chance of clarifying this?

Those are pieces of text that should have gotten updated and did not. The current 1.1 releases should continue to work for sometime, and we wouldn't let an old release expire with putting out a new one to take its place. I'll look up the actual dates the current releases will expire and post them here later.