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It's not explicitly mentioned in the system requirements on the download page but I've seen one blog post which suggests it can.
You should be fine using Prism (for Silverlight), since it is simply a library. I made a small smoke test (really small) by running the
Remote Modularity Quickstart in the Visual Web Dev Express and everything went OK.
Of course, some of the features VS would allow you to take advantage might not be available when using VWD. You can find more information in:
Comparing Visual Studio and Visual Web Developer Express Edition
Please let me know if this helps.
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