Oy, sorry - been there done that a couple of years ago, I could have warned you. :(

Silverlight is indeed the problem. The old proprietary Netflix player worked beautifully, but when they decided to unify their code base it went out the window.

My solution was similar - a tiny $80 Roku. Lovely Netflix playback, zero tearing. I'm also running Plex on it with the HTPC serving files for torrents/etc; it's free and works great.