I am also running VS 2010 on Windows 7 along with Silverlight 4 Beta. My project was running fine until I added a Telerik control (RadTileView). The addition of Telerik.Windows.Control.Navigation.dll to the project references seems to be the cause of the error:
Error 1 The "ValidateXaml" task failed unexpectedly.
System.IO.FileNotFoundException: Could not load file or assembly 'System.Core, Version=22.214.171.124, Culture=neutral, PublicKeyToken=7cec85d7bea7798e' or one of its dependencies. The system cannot find the file specified.
File name: 'System.Core, Version=126.96.36.199, Culture=neutral, PublicKeyToken=7cec85d7bea7798e'
at System.ModuleHandle.ResolveType(RuntimeModule module, Int32 typeToken, IntPtr* typeInstArgs, Int32 typeInstCount, IntPtr* methodInstArgs, Int32 methodInstCount, ObjectHandleOnStack type)
I tried upgrading to SP1 and got the same results.
We had a great experience doing a proof of concept with the Telerik WPF controls, but if I can get this Silverlight bug figured out soon I won't be able to convince management to go with Telerik for our next generation product line. Any help would be greatly appreciated.