I'm pretty familiar with a lot of the ins and outs of full fledged WPF client applications. I know that WPF client applications supports the full .NET Framework 3.5, allows for hardware acceleration of 2D and 3D graphics, theming, templating, styling, triggers, the works.
What I'm not clear about is what features, and/or niceties are either present or lacking in XBAP and Silverlight applications. I've heard that XBAPs are intrinsically limited in certain ways due to security concerns, but that's about it.
I know for a fact that WPF is robust enough to be used in full-scale business applications, but what about XBAP and Silverlight? What are the significant capabilities and limitations of each? Do either of them lack features that would render them useless when used in a business application?
Wintellect wrote a good comparison between Silverlight and WPF published here: http://wpfslguidance.codeplex.com/Release/ProjectReleases.aspx?ReleaseId=28278
From personal experience in WPF and Silverlight I've found that SL is fully capable for LOB apps. The .NET RIA Services are an excellent addition to SL3 for LOB apps. To answer your last questions, there is nothing in my experience that holds SL back from creating LOB apps. The only significant difference between WPF and SL in this discussion is that SL doesn't have access to the local resources on the client machine such as the registry and can't access Windows specific features that WPF can such as Windows 7 jump lists or libraries. I think Silverlight is the best choice for biz apps due to ease of deployment and ability to target multiple platforms.