I have created a Silverlight application in VStudio 2010 (Beta 2) and wired it to sharepoint by using Silverlight Client Object Model. With F5 debugging, the code in ClientRequestEventHandler (OnSuccess) can't be hit:
ctx.ExecuteQueryAsync(OnSuccess, onFail);
However, if I put the .xap file in sharepoint _layouts folder, and link it to sharepoint OOB silverlight webpart, the code in the eventHandler are executed well. Even though that doesn't help to debug the silverlight application, it does give me a clue why running from VStudio doesn't work with SharePoint Client OM.
Silverlight, as a client technology, has limitations on crossing domain access. With sharepoint lives in http://localhost/, and Silverlight test web lives in http://localhost:randomPort , that is treated as crossing domain access. To verify this, under sharepoint iis root path, i create a clientaccesspolicy.xml file. I can then debug into the EventHandler Callback code with VStudio F5. Works like a charm!
Another anonymity is, when hosting silverlight app by using OOB Silverligh webpart, after updating .xap file, you have to also delete the browser's cookie to see the refresh.