The toolbar with the timeline and other controls doesn't show up in the SL player when in "embedded" mode. It does show up (permanently, I thought it used to popup, but I'm not sure).
This is with Silverlight 3.
Update: It only seems to be gone if you start the video in IE8 at a zoom level > 100%.
In contrast, try starting a video at a zoom level less than 100%. The toolbar will show up in the middle of the player.