Although you may have found a solution, I have been having to research the same kind of issues, and I am posting this solution for anyone who may this information useful.
I am currently investigating how to do an easy deployment of a Silverlight application hosted in an asp.net website that uses a DomainService to read from and write to a SQL Server database. One solution that I have got working is to install IISExpress 8.0 and SQL Server 2008 R2 SP1. Then create two batch files: 1 to start up IIS Express, and the second one to open a browser pointing to the specific page that contains the Silverlight application. These batch files are placed the root folder containing the website.
The batch file to start IIS Express contains the following commands:
CD C:\Program Files (x86)\IIS Express\
IISExpress.exe /path:C:\ThrowMeAway.com\ThrowMeAway.com.Web\ /port:9090 /clr:v4.0
The batch file to open the browser and point to the Silverlight application contains the following commands:
start /max http://localhost:9090/ThrowMeAway.comTestPage.html
The downside to this approach is that a command window is open. Now you do not want a command window to open on a client's computer, so the way to overcome this is to write a small VB.NET or C# Windows Forms application that will execute the above commands using the .NET Framework Process.Start commands.
However, I am still looking into how to self host without IIS. Katana and CassiniDev to two options that are worth investigating.
A good article worth reading regarding CassiniDev is Using CassiniDev to host ASP.NET in your application
And as far as Project Katana goes, a good place to start is by reading An Overview of Project Katana
I hope the above information is useful.