I've started working on this the last couple of days.
I'm not certain yet if I'll need to produce an IronPython patch or I can make my stuff operate independently....
I haven't checked any code in yet, but I did setup a google code project for the work:
I'm aiming to create at the least to start with either a linkable DLL that you can invoke from a running sdl-sdk app to compile the code in the XAP, or a standalone Silverlight App that can convert an uploaded XAP to dll.
I am also looking into implementing a command line compilation with a --nostdlib option similar to Boo's which will allow linking specifically against the Silverlight / SDL-SDK assemblies.