When I see the call System.Windows.Browser.HtmlPage.Window.Eval (which is evil) in ReportErrorToDOM (in App.xaml.cs) this shows me that it has no relationship to onSilverlightError. So what kind of JavaScript-based scenario calls onSilverlightError? When will onSilverlightError definitely be needed? What are Silverlight error-handling conventions in general?

This is a very important comment by Erik Monk but needs more detail:

There are 2 kinds of terminal errors in Silverlight. 1) Managed errors (hit the managed Application_UnhandledException method). Note that some errors may not even get to this point. If the managed infrastructure can't be loaded for some reason (out of memory error maybe...), you won't get this kind of error. Still, if you can get it, you can use a web service (or the CLOG project) to communicate it back to the server. 2) Javascript errors.