Can we host an .xap in IIS? Can we have SL application without web project i.e. html and aspx pages? If yes, then how the silverlight application will be hosted and used?
Not sure why the harsh down-voting, as it is useful to know how to do raw Silverlight hosting, but you can host a XAP file pretty much anywhere. It is the Silverlight plugin that knows what to do with the file (much like the flash knows what to do with flash files hosted anywhere).
As an example these blog entries (my blog) show how to host a silverlight app/XAP for use in Wordpress: http://blog.hitechmagic.com/?s=silverlight+in+wordpress
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