Hi Adam,
the example you gave me works. Im using Silverlight 3.0.50106.0. I also tried with the latest version (4.0.50401.0). In both cases, I receive the same message. Im testing it on localhost.
When im testing the controller not in the IFRAME, as in loading the source of the IFRAME in a page, the controller works. The only thing I can think of is that im dynamically creating the IFRAME. At the initial of the parent page, the IFRAME does not exist. At some point in the process, I create a Window (div) with an IFRAME in it (using ExtJs). Nonetheless, a source of an IFRAME gets loaded like any other page, I dont see any reason the controller would think silverlight it is not installed.
If the problem is at the browser level (works with IE6, not Firefox 3.6.3) then I will figure something out. If its not, then let me know what I need to do/test to make it work.
I cant use flash because my server is Windows 2003 and since it is a corporate application, I cant put the authentication to anonymous and even though it works with FlashLoadMode=true, it eats up too much memory and slows down the server a bit too much (500mb+ files). Silverlight is my only solution.
Rafael