UPDATE: This answer is now over a year old, and it's currently my most highly upvoted and most highly downvoted answer on SO, so clearly it's received a lot of attention. I thought I'd go through and update the answer a bit to respond to the comments.
I've blockquoted my answer as originally posted, and interspersed updates below:
Your logic is faulty, for three major reasons:
1. Anything on the web that depends on the user installing a plugin has historically had a very hard time gaining traction. Until browser vendors (other than Microsoft) begin bundling Silverlight, there is no reason to believe Silverlight will have any notable market share outside of IE.
Update: In response to Darrel Miller, who said: "I would say SVG is an example of an open technology that has been incredibly unsuccessful so far." -- I think this makes my point. While many browsers bundle SVG support these days, the 800lb gorilla doesn't, and so IE users would have to install a plugin to view SVG images. I think the lack of native support from IE has been the single biggest factor hampering the adoption of SVG.
2. Anything on the web that depends on a single, proprietary implementation has historically had a very hard time gaining traction. (The best success story so far is Flash, but that's only because browser vendors OEMs have bundled it by default. And even Flash has competing implementations these days. Plus more and more "Web 2.0" style sites are going an AJAX style route instead of using Flash -- I wouldn't be surprised to see Flash start to wane before too long.)
Update: A lot of the comments are in regard to that last, parenthetical statement. But I think the point is still valid.
I won't try to deny that Flash has excellent penetration in the desktop market, but there are still plenty of issues for non-desktop web clients. For example, currently the iPhone and iPad don't support Flash at all, and many other clients, like the Wii web browser, only bundle outdated Flash versions. Flash has more than a decade head start over Silverlight, and it's likely that Flash won't ever get any more penetration than it has now, but it's still not 100%. Even for websites that can afford to only target the top 90%, right now either Flash or some JavaScript framework are the only viable options. Silverlight won't catch up for years to come, if ever.
Also, in a way Flash is the exception that proves the rule. In my original answer, I only said that plugin-based solutions have "historically had a very hard time gaining traction", not that they never do. Flash took quite a while before it caught on, as I recall.
Finally, several of the commenters, including James Cadd, point out that I was wrong: browsers don't usually bundle Flash (Chrome is now the exception to that rule). Sorry about that. I think what I meant to say was that OEMs bundle Flash on most new computers, and I've corrected the text in the paragraph above. If computer manufacturers hadn't been bundling Flash on new computers for years now, I think users would have been reluctant to install it themselves, and its adoption rate would have been much slower. Hence, my point still stands: until someone starts installing Silverlight for them, most users won't have it installed.
3. If your argument is that C# is better suited to web development because it is statically typed, then you really need to read this: What to Know Before Debating Type Systems.
Update: I still stand by this. As deceze commented: "The user doesn't care how easy or hard the programmer has it." Personally, I think frameworks that try to hide functionality under a single programming language cause more harm than good. I believe a good web programmer needs to know JavaScript and HTML, whether your backend is written in C#, Java, Ruby, PHP, or something else altogether. The idea of using the same programming language for server-side backend and in-browser UI is tempting, but ultimately I think it's a leaky abstraction. You use abstractions to make programming easier, but when your users can see your abstraction start to poke out around the edges, you need to remember that ultimately, the user doesn't care about how you built the site, just what it takes for them to use it.
In fact, JavaScript is better than it's ever been, and I see no reason to think it's going away soon, if ever. I'm a huge fan of C# too, but it's apples and oranges.
Silverlight is Java Applets from 1995 all over again, only with fewer features (since the CLR doesn't have the cross-platform consistency that the JVM has). I don't see what the fuss is all about.