I struggled a lot to get Silverlight 3.0 to work for me prior to finding this. Most of the examples I found on the web were based on 1.0 or 2.0. The only thing I had to change in the above example was to use:
<param name="source" value="ClientBin/SilverlightApplication1.xap"/>
instead of:
<param name="source" value="SilverlightApplication1.xap"/>