Messing with the registry keys (like AllowElevatedTrustAppsInBrowser etc.) should not affect localhost operations. In any case, you mention you added and then deleted the keys. So the Silverlight registry entry should have the 3 default keys.. Default, Version & UpdateConsentMode.
Try quitting Visual Studio including the "IIS Web Express" server on the task bar. Also, try exiting all the IExplorer.exe processes from the task manager.
Now open Visual Studio and try again.