Hey Larry - this is one sweet app. Yahoo! has really shown off some interesting UI capabilities. Hopefully the Windows Live Messenger folks are paying attention 
However it does not use Silverlight. Silverlight is designed for delivering awesome interactive experineces on the web through its multi-browser plugin. Yahoo! Messenger for Windows Vista utilizes the Windows Presentation Foundation (WPF) which is built in to Windows Vista (and available for download for XP users). WPF is not Silverlight.
- Brandon