Normally when I have develop a service layer for my silverlight app I have it all in the same web project (easy, no clientaccesspolicy headaches), … but in some cases I have my service layer in a separate solution, in theory it’s quite easy to setup a client access policy, but… when you try it it fails because that xml policy file is not in the root of the cassini web server :-(.
What to do.. change your settings, good old trick that can be applied even to VS 2005 :-)
http://weblogs.asp.net/scottgu/archive/2006/12/19/tip-trick-how-to-run-a-root-site-with-the-local-web-server-using-vs-2005-sp1.aspx