Question:

I am using Blend to create Silverlight application. But Silverlight is behaving quite strange.
I have installed  Silverlight alpha  refresh.  When I browse other sites with silverlight content I can view them without any issue. However when I try to execute my application from blend it opens the browser and just displays the logo to download Silverlight.

Answer:

Let's get it clear on what the problem is before we solve it.

Working with Silverlight today we often see these buttons prompting us to download Silverlight when opening an existing Silverlight application:

There are some reported cases of customers clicking these buttons, downloading Silverlight, installing it and still seeing these "Please install Silverlight" notices. Which is to say the least - highly problematic.

These messages appear based on settings in our "Silverlight.js" file.
That file we all add just because Microsoft tells us too is actually the file responsible to identify what version the user has installed, gets the version needed for the application, determines is the version is present and if it isn't displays this link to the download page. 

In the header of every "Silverlight.js" the version it's intended for is listed.
So let's open a few of these "Silverlight.js" files and see it's really written these and I'm not just making this up:

Additionally each Silverlight application when initialized asks for a specific version:

What happens is that sometimes the application asks for the wrong version.
Or more frequently - We've got the wrong "Silverlight.js" file in our application.

You should check your "Silverlight.js" version number and you'll probably find it belongs to a different version then the one you're trying to run, or an older version. (like the 1.0 Beta/RC)
Copying the appropriate new "silverlight.js" file to your project will cause the logo to disappear. You can get the approprite "Silverlight.js" file by opening a new project from the right version and just taking it from there. Due make sure to check the version number listed in it matched what you need.

Link: http://silverlight.net/forums/p/5980/18336.aspx