Changes or discontinuity can't apply retrospectively. They can make a Silverlight v5 and change the rules for that. They can even withdraw the covenant and prevent future new distributions but they can't retrospectively change the agreement and sue anybody who is distributing stuff created under the old version of it. They need to be able to change the agreement to do things like including third party distributions, or I guess, to comply with the terms of the next law suit against them.
Practically they want Silverlight as widely used as possible because its the only chance they have of competing with Flash. This gets distribution to Linux without them having to 'dirty their hands' doing actual Linux development. (They can't bee seen to support it directly. There is a version for OSX but I guess they don't consider that to be much competition.) They expect get profit here from selling Visual Studio and Office Online more widely.