I am currently researching new technologies for our company's development road map and saw that Silverlight 3 has the ability to install an application on the client's desktop.
Is this feature a full or partial emulation of a WinForms application and does it provide the ability to access all or limited local resources on the client's computer?
it's not a winforms application at all, this will even work on linux (via moonlight). it does provide some resource access, but it's sandboxed unless the user allows certain access. Just like adobe air.
It's not an emulation of WinForms at all. The closest comparison to true Desktop technology would be a WPF (Windows Presentation Foundation) application.
If you're familiar with Adobe Air, the Silverlight Out of Browser experience will be similar...but different. The main difference being that a Silverlight out of Browser application will run in a "protected" sandbox which means your application will only have limited access to resources on the host PC.
The Silverlight 3 Getting Started page lists some details. Scroll down near the bottom and read the details under "Out of Browser Capabilities". It says that Silverlight 3 applications are sandboxed and, while they have access to persistent storage, this storage is separate from the regular file system.