The first time I heard that Microsoft was working on a flash-killer I wen't "Yeah rrrrrrright ...".
This week - Silverlight 1.0 was released at Mix07.
Hmmm ... after looking at the presentations, trying out the demo's and fiddled around with the new Expression studio, I must say ... Impressive !
Clearly there are some features there that outperform flash ...
But will it stick? Probably, but flash won't go away any time soon.
So in the end: yet another choice for webdevelopers, yet another technique to master, yet another field to explore.
You have to give it at microsoft ... they are spreading themselves paperthin by trying to compete in all markets at the same time, but is there another company that can pull this off ?
Other companies have tried to come up with a flash-competitor, I don't even remember the names (What was that Adobe flashlike thing before they bought Macromedia ?), but Microsoft's Silverlight is here to stay: the integration with exixting web and desktop techniques is just too strong to ignore.
If I had to choose between the Flash Actionscript 3 path and the Silverlight .net path ... Maybe I would go with .net (but probably I'll end up doing both)

Busy times! Silverlight released, Flash CS3 released, Dreamweaver CS3 released ...
(and offcourse new version of Photoshop, Illustrator ... but I couldn't care less)