I asked a similar but more complex question a while back (silverlight paramterised resource values for internationalisation)
The example given on MSDN is really insufficient for serious localization, it assumes every string is entirely present and has no parameters, the reality is you will have values you wish to embed within the string but need placeholder to mark the location of that variable in the string so a translator can move the marker as they translate.
You can achieve a more advanced mechanism by implementing multi-binding yourself into silverlight - Colin Eberhardt did a nice implementation (silverlight multibindings how to attached mutiple bindings to a single property) - adjusted a bit and combined with a MultiValue Converter you can perform multiple bindings, allowing the first binding to be to the language file, and subsequent bindings to be to the parameters to be embedded.
It's quite a pain but the localization story is just noticably lacking - even chatting at the PDC09 over silverlight 3 / 4 there is really not a great route at present in place - if WPF multibinding makes it across to SL4 that makes it slightly easier, but I havn't seen a good alternative implementation as yet except for people outputting all the strings from the ViewModel - which seems wrong form the 'designers' perspective.