Add New Item to the Silverlight Class project > Silverlight Application Class (This adds app.xaml, app.xaml.cs files)

Open the class library project file and change false to true (Unload the class library project and edit the csproj file)

Add new element XapOutputs to project file below the element i.e. add true

Now open Project Properties of the Silverlight Class library and change to the > Silverlight tab > Change the starter object

Change the following Project Property > Silverlight tab > Set the Xap file name

In the related web application add project property > Silverlight tab > Add your Silverlight application

You have not changed a Silverlight class library to an application project where the xap will be output and copied to the respective web site ClientBin directory.