Finally I got chance to play around with Bluelight (Microsoft Silverlight Streaming by Windows Live). Thought I wish tools would make it lot easier, manual steps are not that hard to figure out.
- Create silverlight V1.0 player application (using Expression media encoder) with video and all the JS files required
- Create a package of your video using instructions in quick start.
- Host it on your website. It seems they have started supporting hosting using iframe which is lot more easier than earlier script based approach. you can find information about new approach here in news article on 1st of August.