Troubleshooting: Silverlight and IIS 6
--> Open up IIS manager
--> Right-click Server Name
--> Properties
--> Mime Types
--> New
and add the following 3 entires one after the other:
Extension : .xap Mime Type: application/x-silverlight-app
Extension: .xaml Mime Type: application/xaml+xml
Extension: .xbap Mime Type: application/x-ms-xbap
Once done with this, you should be good to go ...
Oh by the way, you would have to do the same if you are still running the RTM version of Vista (IIS 7). From Vista SP1 onwards this was taken care by default. More info at iis.net
Have Fun!