First Floor have released version 1.0 of their document toolkit for client-side display of XPS using Silverlight. Details in this blog post. The documentation is also available online, including details of conformance with the spec, note that TIFF and HD Photo images and ICC color profiles are currently not supported.
Another XPS in Silverlight link. This one is from Simon Guest with details on how he updated David Anson’s sample to work around changes in Silverlight 2. Source code available.