Hi !
Probably you simply don't have .xap MIME type registered on the IIS server. Here is quite a good explaination for the procedure in IIS7, and It's probably something similar in IIS6.
I made a test on my IIS7, and it behaves exactly like that when .xap MIME type is not registered.
Hope this helps.
In general, then THIS site (the one that contains the article above) seem like a really interesting site for Silverlight stuff (articles, tips, etc.).
Palli