Play the rtsp stream from the camera in VLC and check the Tools > Codec Info. Make sure you have an audio stream.
Check the logs, look for a line like this:
WARN server comment - LiveStreamPacketizerSmoothStreaming.handlePacket[smooth/_definst_/ch08mobile]: Fragment duration greater than suggested range of 1-4 seconds. Adjust keyframe interval accordingly: Fragment durations: [10.0,10.0,10.0]
In which case the stream will not work in Silverlight player. Look at the FPS and Gov settings again