I recently came across this issue, and I have fixed it. I reinstalled the ArcGIS Viewer for Silverlight 1.0.1. At that point I rechecked my permissions for \inetpub\wwwroot\Apps and found the following:
The SilverlightViewerAppPool user has the following permissions for that \Apps folder: Modify, Read & Execute, List folder contents, Read, Write. Special permissions is gray, meaning there are sub-categories that have various permission levels. I'm thinking the permissions were reset upon reinstall? At any rate, it's working now. Hopefully this helps someone.