There is no conflict between HTML5 and Silverlight. We do not expect Silverlight to replace HTML. But Silverlight is nice enough to build RIA application. 
 "The CIO/CTO Effect" is huge, likely beyond what Microsoft can understand, so what's Micrfosoft strategy on RIA application.
Plus, WP7 is still a big unknown in market place, what if WP7 fails, then what happen to Silverlight ? even Steve Ballmer does not have 100% confidence if you watch his WP7 launch interviews as how much market share WP7 will gain. 
Microsoft is lack of innovation as everyone says, because it has not own believe. often does good job to copy other and catch up staying the game, WP7 is another good example. only difference this time is nicely done, but too late. Microsoft has been trying to so hard to be respected, to be relevant after so many screw ups recent years. finally has something hold its own future like silverlight, as leading technology for RIA application, now shifted ? 
Often time, it is about your believe, Apple has own believe, so does Google. what's your believe, Microsoft ? not even believe in yourself anymore ?