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I thought Windows Phone 7 didn't support Silverligth in the browser and that is was only intended for application (you know, App) development.

Please do correct me if this has changed and I am wrong.

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You are correct. Web-based Silverlight application does not run on WP7. You can (rather easily in some cases) develop a WP7 app with the same codebase as a Silverlight app though.

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