Microsoft has used Avalon internally already for a major application: Sparkle.
Expression Interactive Designer (aka Sparkle) is a 100% .NET, managed code application. The source is currently more than 1200 .cs files and about 140 .xaml files totally 210,000 some lines of C# and 23,000 some lines of XAML. There is no unmanaged code directly in the Sparkle source, and only one PInvoke. The single PInvoke is used to call out to HtmlHelp. We could have used the managed wrapper for HtmlHelp, but that is in the WinForms assemblies, and since we are so Avalon based we decided to avoid additional WinForms dependencies (frankly, for interop reasons we will probably have them anyway, but sometimes it is the thought that counts).
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Cool to see that Avalon has been thoroughly dogfooded. This way *we* won't have to sift out all the bugs...