Been closely monitoring whats happening at FOWA 07 @ Excel, London.

Adobe VS Microsoft Silverlight

AIR is a cross O/S runtime that allows web application developers to use their existing web development skills such as HTML, JS,Flash,Flex, Ajax etc to build and deploy rich Internet applications (RIA) to the desktop

Conclusion :

Microsoft will build a better developer toolset, and provide a better story for tool integration. However their unwillingness to support MacOS, and their inability to truly understand creativity will be their drawback (Lets us see how MS Expressions work) . Adobe has a deep cultural understanding of the creative process, and experience with cross-platform support.