Have you tried following the steps outlined in the following blog post to extend the Silverlight Isolated Storage Quota?
There's also a Microsoft KB that addresses this issue, but some users have reported that it may not work with later versions of Silverlight. The method above while painful, appears to be the only known reliable workaround at this time.
Below is the specific excerpt.
Isolated Storage
Silverlight web and out of browser applications are allocated a default amount of isolated storage space. If an application requires more space it can prompt a dialog to the user to approve the requested increase.
Silverlight provides a setting for machine admins to increase the isolated storage to the maximum allowed amount thereby avoiding the prompt.
This setting is available in the registry for enabling maximum isolated storage
Key path: HKEY_LOCAL_MACHINE\Software\Microsoft\Silverlight\
Value Name: AllowMaximumIsolatedStorage
Value Type: DWORD
Valid Values:
Enabled — 0x00000001