I’m involved in developing Silverlight 3.0 development. My environment i s.NET 3.5 SP1, VS 2008 SP1 and Silverlight 3.0. It was working fine until i upgraded the silverlight runtime 4.0. I’m getting this error “Unable to start debugging. The Silverlight managed debugging package is not installed”.
I’ve learned that the fix for this is to install the Silverlight 4.0 install for developers http://go.microsoft.com/fwlink/?LinkID=188039
After installing this hotfix, i could able to debug Silverlight 3.0 applications in VS 2008, with Silverlight 4.0 installed side-by-side.