Silverlight Tools for VS2008 installation issue
Problem after installing Silverlight 1.1 Tools for VS2008 ?
"The project type is not supported by this installation."
Try this on VS command prompt: devenv /resetskippkgs

Read the complete post at http://weblogs.asp.net/lduveau/archive/2008/01/14/silverlight-tools-for-vs2008-installation-issue.aspx