Silverlight 3 Tools Prerequisite: Visual Web Developer
One of the prerequisites for Silverlight 3 Tools for Visual Studio is the installation of the Visual Web Developer feature in Visual Studio 2008 SP1. This is separate from the free Visual Web Developer Express. If VWD is not already installed with your instance of Visual Studio, you can add the feature in Visual Studio's Maintenance Mode.
Check the box next to Visual Web Developer (also, make sure you Visual C# and/or Visual Basic also installed) and click the Update button.
Once the installation is complete, you can install Silverlight 3 Tools for Visual Studio 2008