The windowless property is on the control itself -
asp:Silverlight ID="MySL" runat="server" Source="~/ClientBin/MySilverLight.xap" MinimumVersion="2.0.31005.0" Width="100%" Height="100%" Windowless="true"/>
I think what is really happening is an Iframe possibly in a div is generated on the page in html and then absolutely positioned over the control. I may be wrong but I am pretty sure Silverlight 2.0 doesn't support any html content within the scope of the control. I hope this helps.