if you run into problems adding a service reference to a sl2b2 app, it’s likely due to a sl2b2 install bug that manifests itself if you installed with certain pre-conditions. to fix it:
First check your Silverlight Tools for VS 2008 install size on Add/Remove Programs window. If it is 1.14 MB, then you need to do the following:
1) Uninstall your Silverlight Tools for VS 2008,
2) Remove (delete) the following dll C:\Program Files\Microsoft Visual Studio 9.0\Common7\IDE\Microsoft.VisualStudio.ServicesProxy.dll
3) Re-Install Silverlight Tools for VS 2008.