Normally common starting error is “InitializeError error #2104 in control 'Xaml1': Could not download the Silverlight application. Check web server settings”
To resolve this error ,You must check in IIS if MIME Type Silverlight is inserted.
In IIS
1) Go to Site Properties -> HTTP Headers
2) Click MIME Types
3) Click New
4) Fill the follow fields:
Extension: .xap
MIME type: application/x-silverlight-app
5) Finish!
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For more details you can review this article.
http://weblogs.asp.net/javiervillarreal/archive/2008/06/14/silverlight-error-2104-could-not-download-the-silverlight-application-in-iis6.aspx