In Silverlight for hit testing are used the absolute coordinates of the application. In case you want to hit test with coordinates relative to a System.Windows.UIElement you need to get the coordinates of the UIElement relative to the application root (i.e. the absolute coordinates of an element).
C#
GeneralTransform generalTransform = uiElement.TransformToVisual( Application.Current.RootVisual);
Point elementToApplicationRootCoords = generalTransform.Transform( new Point( 0, 0 ) );
And then add them to the coordinates relative to the element.
C#
Rect areaInAbsoluteCoordinates =
new Rect( areaRelativeLeftCoordinate + elementToApplicationRootCoords.X,
areaRelativeTopCoordinate + elementToApplicationRootCoords.Y,
areaWidth, areaHeight );
IEnumerable<UIElement> childrenInArea = uiElement.HitTest(areaInAbsoluteCoordinates );
That's it!