Tim Sneath, Technical Evangelist Manager at Microsoft wrote a clear anwer [1] to the question: "Am I allowed to publish Silverlight 1.1 application on my website today?". The answer is "No!". Not for commercial and not for non-commercial purpose. Even not for demonstration purposes. This act violates clearly the EULA (End User License Agreement) that you agreed before downloading the Silverlight 1.1 Alpha release.
Why is that? Silverlight 1.1 alpha is a developer preview build provided to you for testing purpose to empower you to build applications before the software is being released publicly. Same as with MSDN subscription and software licenses available for internal development test purposes.
All Silverlight 1.1 applications available today on the internet are violating the EULA and are illegal. There are some exceptions to this global rule but as always these are the exceptions that prove the rule. So be careful about that. 
The first non-commercial "Go Live License" for Silverlight 1.1 application will be available after the MIX08 [2] in March 2008 according to Tim "...We'll also have a non-commercial go live license ready by then..." [2].
As for the INETA European Silverlight Challenge - we are compliant to the requirement not to host the Silverlight 1.1 applications publicly before MIX.
[1] http://blogs.msdn.com/tims/archive/2007/12/12/why-can-t-i-go-live-with-silverlight-1-1-alpha.aspx
[2] http://blogs.msdn.com/tims/archive/2007/11/29/silverlight-1-1-is-now-silverlight-2-0.aspx