I faced this problem recently. I tried and tried but I got different error messages for uninstall Silverlight 4 SDK and I needed to upgrade to Silverlight 5.
So after a lot of tears and suffering I came across the Microsoft Fix it.
http://support.microsoft.com/mats/Program_Install_and_Uninstall
I runned this program and indicated that I wanted to uninstall Microsoft Silverlight 4 SDK and it was like magic!
It checked the registry, and fixed it, and then uninstalled the MS Silvelight 4 SDK.
After that I just download the new installer run it and everything work! Isn’t it something J
If you are getting ready to migrate your applications to Windows Phone,
you have to install all the neccesary Windows Phone Stuff.
However you might have incompatibilities in your dev machine.
This post: http://blogs.msdn.com/b/astebner/archive/2010/07/12/10037442.aspx
Is great. I used it to identity why the installation tool insisted that
I had a Windows Phone Emulator installed in my machine. It seems that it looked for something like XDE.
So if you have this same issue or something similar just take a look at that post, it might be of great help