I'm a Silverlight newbie. Just downloaded version 3.0 after the Mix announcement. I'm running VS 2008 SP1. When I select a design element in the preview pane or in XAML, the properties window is disabled and displays
Property Editing Not Available
I can open the solution in Blend and have no problems with it's property editor. So within Visual Studio, I'm forced to enter everything in the XAML pane and rely on Intellisense.
Is something wrong with my installation or environment? Or am I supposed to switch back and forth between Expression Blend and Visual Studio (I can't believe that should be the case).
There is nothing wrong with your installation or environment. The XAML designer/editor in VS2008 is very limited in what it offers for XAML editing whatever the version of Silverlight, being really just a rendering engine at the moment.
Expression Blend is the visual editor of choice for now - there are 3rd party editors available (such as XAMLCruncher and Kaxaml) but they don't really support XAML with code-behind classes.
Additionally the Blend 3 preview that was released to support SL3 seems to have a few improvements which address previously inferior experience of directly editing XAML in Blend (notably IntelliSense).