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I have been using WPF for a while, and I keep on realizing again and again that Microsoft invests its efforst in Silverlight, not in WPF (RIA Services, default theme, controls and more).
I thought it might be a good idea to migrate to Silverlight (i.e. creating standalone desktop apps with Silverlight 4.0), the question is whether this is possible or not.
BTW, I think LightSwitch applications are generated with Silverlight as standalone desktop apps.
It is possible to create standalone desktop apps(Out of browser apps) with silverlight version 3.0 or higher and it works great. Now it is also possible to install the out of browser app even without opening a browser as shown at this blog post .Silverlight is awesome and silverlight apps even run on MACs and Linux(limited support)
However, it is not true that Microsoft is only investing in silverlight. Microsoft is investing in WPF too. Though it is possible to create out of browser applications with silverlight, they have lot of limitations when compared to a full blown WPF applications.Dont forget that silverlight is just a subset of WPF, for example, silverlight doesnt have ADO.NET, Hardware device access etc. So if your application is merely a business application and you dont have to access hardware devices or database directly then silverlight might be an option, however if your application accessing client machines hardware resources directly then you are better off with WPF.
My suggestion is, If you know before hand that it is going to be a desktop application then go with WPF(or may be even XBAP). In my experience, useful applications grow with time, new features are always requested time to time. If in future,a feature is requested that cannot be accomplished with silverlight and can only be accomplished with WPF, then you will be in a big trouble because you need to rewrite your app in WPF and it will be hard for you to convince your CFO to allocate more fund just to implement one feature. Silverlight is not designed to develop desktop applications, its main goal is multi-platform support.