To make XBAP development easier you can build your application in a library and make an xbap and an exe project link to it.

To make an xbap use an application object in the library you just need to call the constructor on it. No need to call Run or anything.

This tends to kill intellisense for the xaml files in the library.

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Be sure to sign and version your xbaps or you will have versioning issues. If this happens you'll probably need to clear the clickonce directories under C:\Documents and Settings\username\Local Settings\Apps\2.0

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IE 6 or above is required for these. Firefox support comes with .NET v3.5.
Blog post with all the ugly details on cross browser support for applications .

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Sandbox Limitations

XamlWriter.Save workaround
How to trigger a Download Dialog