Jamie Cansdale of TestDriven.NET fame just posted an intro post describing the hosting of Silverlight's CLR - CoreCLR.
Having the ability to host the runtime inside a Win32/.NET process brings up new possibilities, especially running Silverlight apps outside the browser or developing test harnesses/unit tests for Silverlight intended object models.
Silverlight 1.1 alpha and CoreCLR currently expose a very trimmed down version of the Framework's BCL. This will change by RTM, but be aware that its sweet spot is still the browser.
I can imagine a world where Silverlight apps will not only be media/presentation related. Currently, the competing platform, though having a strong install base, has not reached into that space.
You could arm Flash developers with rocket launchers, but they would still lose a
battle war against .NET developers armed with chopsticks. Every day of the week and twice on Sunday. I believe the number of souls will significantly influence the outcome in this case.