I had a requirement to show images in Silverlight dynamically and that was quite simple can be done in two steps in a minute but I spend nearly hours to figure out the issue.

Dynamically show images from code behind

var bitmapImage = new BitmapImage(new Uri(“http://www.google.co.in/intl/en_com/images/logo_plain.png”);
image1.Source = bitmapImage;

The above code will make you smile only if you run the application from the silverlight web application project and not the default genarated testpage.html

The whole point is that this scenario works only if the application is hosted or run from an local web application with fileserver.

Note: Only JPG,PNG,BMP works this way and GIF doesn't go well. Check this post to make GIF work

http://www.eggheadcafe.com/tutorials/aspnet/c0046ba1-5df5-486a-8145-6b76a40ea43d/silverlight-handling-cro.aspx