<p>We have a Silverlight application that needs to load a number of .png files.  We can load the images OK, but Silverlight doesn't support reading the pixel data from the Image class.</p>

<p>Can anyone suggest a simple solution for getting at this data?  Our current best bet would be a third party .png loading library, but we are having trouble finding a suitable one.</p>

There is no built in classes for doing pixel based imagine manipulation/generation i n Silverlight. You need to implement your own PNG Encoder/Decoder that works on an byte array containing the image information. Joe Stegman has implemented one such encoder you should check out. He got lots of great information about "editable images" in Silverlight over at
http://blogs.msdn.com/jstegman/
. He does things like applying filters to images, generating mandlebrots and more.
This blog discuss a JPEG Silverilght Encoder (FJCore) you can use to resize and recompress photos client size:
http://fluxcapacity.net/2008/07/14/fjcore-to-the-rescue/
Another tool is "Fluxify" which lets you resize and upload photos using Silverilght 2. Can be found over at
http://fluxtools.net/
So yes, client side image processing can definitely be done in Silverilght 2. Happy hacking!