If you keep being prompted to install Silverlight when it is already installed, then you are at the right place (hopefully!). There can be different reasons for the failure. Here I am listing some of the most common causes and their corresponding solutions:
IE Security Enhancement (This is applicable only for the Server version of IE installed on Windows Servers. Client version of IE does not have this feature): This enhanced level of security can prevent Web sites from displaying correctly in Internet Explorer and can restrict access to network and file resources. Due to Enhanced Security Configuration, IE may be unable to detect a Silverlight installation. The remedy is to disable this enhanced security functionality for that specific site by adding your Silverlight site to the inclusion lists in the Local intranet or trusted sites zones. Please Note: disabling IE’s security enhancement for a particular site may impose security risks at your Server. You need to consult with your IT Security team before taking such steps. For more information about managing Internet Explorer Enhanced Security Configuration so that users and administrators can access trusted resources and Web sites on a corporate intranet and on the Internet, download the "Managing Internet Explorer Enhanced Security Configuration" white paper: http://www.microsoft.com/downloads/details.aspx?FamilyID=d41b036c-e2e1-4960-99bb-9757f7e9e31b
Remove all traces of Silverlight from your machine: Silverlight uses both Registry and FileSystem. If Silverlight installation is not done properly or a corruption happens at Silverlight’s registry or filesystem, then IE may not detect the Silverlight installation. The remedy is to remove Silverlight completely from your machine and reinstall.
To uninstall Silverlight: Follow this fixit link
To reinstall Silverlight: Click here
Resetting IE settings: If the above two steps don’t resolve your issue, then try this one. When you reset Internet Explorer settings, you basically start with a fresh version of Internet Explorer. Follow this link.