You apply the MandatoryPath to the dependency in the saproj that is being picked up from the wrong place.
If you really want to do global search paths, you add this to the middle of your SmartAssembly.settings file (in C:\\ProgramData\\Red Gate\\SmartAssembly):
<SearchPath>C:\\Program Files\\Microsoft SDKs\\Silverlight\\v4.0\\Libraries\\Client</SearchPath>
This is unsupported and not recommended though.
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