Tim Heuer points out, in his always valuable blog, that there's a new way to create Silverlight 1.0 applications in Visual Studio 2008.
Your first step, as Tim points out, is to install the Silverlight Tools for Visual Studio 2008. Once that is done, open Visual Studio 2008,and choose New Website. Visual Studio creates the same starter application that it would if you used the template that was provided with Visual Studio 2005.
You can still use the old template
As a bonus, Sean Wildermuth responded to Tim with his own workaround for extracting the template intended for Visual Studio 2005,and making it available to Visual Studio 2008.
I'm going to personally weigh in on the side of Tim's proposed approach, as it strikes me as more likely to be supported going forward.
