Hallelujah! I solved it! What a waste of time- Visual Studio does something a little bit weird...
I have my solution containing 2 projects (the service and the silverlight web app). However! The service actually contains the webapp aswell. I was just deploying the service (which appears to contain the webapp).
I did a build on the other project and voila everything works!
I can't believe i didn't find anything while searching for the solution to this problem. The deployment is definitely the trickiest bit (there are so many files/folders it's confusing!)
L