I'm actually working on something similar for a DSL used by my employer. We started with Javascript, but recently decided to port to Silverlight. I'm not entirely pleased with the decision, but within the context of the app, it makes sense--the DSL is used to generate screen flows on devices using WPF. By using Silverlight, we didn't have to define the existing WPF controls in Javascript in order to render the scripts from the IDE--we can just leverage (for the most part) the existing controls which are defined with XAML.

Personally, I don't particularly like developing via Silverlight--many of the tools required by VS2008 are buggy, and often there is precious little documentation as to how the tools work under the hood.