It appears Microsoft has removed the designer for XAML files from the latest release of Silverlight 3 Tools. The designer isn’t really gone, its just moved to the bottom of the editor and is hidden by default.
To restore the designer view:
1. Open your .xaml file in the default vs editor.
2. Move your cursor to the bottom of the edit window (right underneath the horizontal scroll) and it should change to a split-style cursor
3. Click and drag up to reveal a pane that looks like the following:
4. Click on the “Resume Loading the Designer” link. The designer should now be present
I haven’t found a way to tell VS to remember this layout preference, and to auto-load the designer yet, but I’ll keep looking.
Its my understanding Microsoft will be replacing it with a better designer when VS 2010 ships.