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UPDATE/correction: jeff weber authored the farseer engine, bill ported for silverlight...both did good work!  thanks for the clarification!

bill reiss of dr. popper fame (my daughter loves the "bubble game" she calls it), just released the farseer physics engine, which has support for silverlight (1.1) as well.

the engine is an easy to use 2D physics engine for XNA and silverlight platforms.  it contains logic for collision, joints, controllers, etc...everything you would need to start a base casual game at least.

bill put it out on codeplex as an open source project as well released under the Ms-Pl.  check out some of the demos of the functions here.