Register XAP file extention in IIS
If you are having problems loading a Silverlight 2.0 application, and you have exhausted all options, you may need to register the XAP file extension in IIS. I banged my head against the wall (well, not really) trying to figure out why my application wasn’t loading. It turns out to be a simple fix. Register the MIME type for .xap to application/x-silverlight-app.
Below are screen shots of where to find MIME type in IIS7.