That's an SEO and usability suicide. Heck, Adobe owns Flash and yet pretty much all of their pages are in (X)HTML/CSS. They're smart enough to understand what the place for these in-browser technologies is.
My guess is that they'll use it at first for sound / video content. I would venture to guess that they'll bundle it as part of MSN Messenger at some point in the future as well, since it's a small addon to the .net runtime.
MS hardly have to redesign their whole website away from HTML, nor is their history one of great effort to eschew hypocrisy. Besides, the dog food story is easy: have a token project or two so people can't say you don't use your own stuff. That's what MS did with SourceSafe and arguably .NET as well.
This seems to me a gutsier move. Flash's greatest strength (and Silverlight's greatest weakness) is its installed base. MS have a big asset in the 8th most visited website; to put it in the service of deploying Silverlight is pretty daring and reminiscent of the MS of old... not necessarily a good thing! But I'm just speculating and could be wrong.
Yesterday when i wanted to download something from microsoft.com i got a popup asking if i wanted to beta test the download with Silverlight. Of course i clicked it away. Downloading is a task of the browser. If the functionality is poor, fix the browser. Microsoft is not alone in this. Adobe, Sun and other companies also try to push useless download managers.
This just shows that they don't understand their own technology. RIA/browser plugins have their place, but not for corporate home pages. If this was the case then Adobe.com would be a full screen flex app and Sun.com would be an applet.