So I've built a very quick silverlight application (I will tidy it up later), that will compile your pixel shader code for you. This saves you from downloading the DirectX SDK.
The url to use the compiler is here: http://www.voxpeeps.com/slpixelshadercompiler/
A little screenshot is below:
In the first textbox, enter the name of your .ps file (do not include the .ps extension).
In the second textbox, enter the contents of your .fx file.
Click on the compile button, and it will give you a link to download your .ps file.
You can the include your .ps file into your silverlight 3 application.
I will probably do a quick video on using this tool soon, and will tidy it up to make it look a little more professional at a later date.