When trying to install Silverlight on Sharepoint 2007 or wss 3.0 its not an easy task.The first step is following the web.config tweeks in this article.
The second step is copying the System.web.silverlight.dll into either the bin folder for the site or registering it with the GAC.
The third step is making sure the scriptmanager is loaded properly. Here is an article that will help you place it in the right spot.
If you have any tips, tricks or resources you would like to share with the group either post them as comments or email them to Susan Fischer at email@example.com and we will post them.