I've hit this issue before, but it took a bit of googling to remember the fix - especially since that little site called stackoverflow came into the mix :)
D:\Readify\Hg\ReadifySample\src>"C:\Program Files (x86)\Microsoft SDKs\Silverlight\v4.0\Tools\Slsvcutil.exe" http://localhost:47862/Services/ParentService.svc
Process is terminated due to StackOverflowException.
No configuration options set. No informative error message. Annoying.
The solution, which was initially posted here over a year ago, is to add in a configuration file alongside slsvcutil.exe, called slsvcutil.exe.config, which will point to the neutral-culture assembly.
<configuration>
<satelliteassemblies>
<assembly name="SlSvcUtil, Version=4.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a" />
</satelliteassemblies>
</configuration>
That's right. If you have set your system language to something other than US English, you will probably encounter this issue.
Enjoy.