Reading too much into it?
A couple of things:
You deliberately say that Microsoft were too late joining the party here, yet from Microsoft's standpoint they are not. Silverlight is the final name of a product that has been around for a little while, wpf/e; a sort of subset of wpf (Windows Presentation Foundation), most commonly known for being the presentation glitz of Vista Aero. wpf/e was created because it was realised, it could be. No sooner nor later.
Now of course they saw wpf/e (Silverlight) was capable of entering a thriving market, so Microsoft have pushed it in that direction and loaded it with features (some unique, some trivial, some questionably copied). It was the right time for Microsoft to enter the market because a product to do so had just matured.
As goes with all products of this type, it's being offered as a convenient means for users to achieve things, wether it suceeds will be testament to that alone and will make all hypothosizing beforehand meaningless.
I believe the success of Silverlight Video may be dependant on effectively piggybacking Silverlight apps. Flash Video was able came to providence by first being used on the odd site, embedded into Flash-based websites. Wether people start using Silverlight depends on the quality of the content that can be created and viewed in comparison to Flash, if every other website asks the user "Would you like to install Silverlight to view this page" then Microsoft and partners have a userbase to push Video to.
Finally, what's RSS got to do with a media player?