The origin of silicate carbon stars has been a mystery ever since their dis
covery. We discuss here a full grating spectrum between 2.4 and 45 mum of t
he silicate carbon star V778 Cyg obtained by the ISO/SWS. The spectrum, tak
en about 14 years after the IRAS LRS observation, confirms the complex natu
re of the object. The spectrum is clearly divided into a short wavelength (
lambda < 6.5 <mu>m), carbon-rich part and long-wavelength, oxygen-rich part
. No obvious change of the 10 and 18 mum silicate features is observed betw
een IRAS and ISO spectra, indicating that the silicate dust is in a steady
structure. The 2.7 mum H2O band and the 15 mum CO2 bands are tentatively de
tected. The near-infrared part of the spectrum indicates that the present-d
ay mass-loss rate is very low. The silicate features can only be fitted by
optically thin dust emission from sub-micron size grains. The total oxygen-
rich dust mass seen at infrared wavelengths is 2-10x10(-6) M., of which 3-5
0x10(-8) M. is warm (300-600 K). If the dust is heated by radiation from th
e central star, the dust should be located as close as about 12 stellar rad
ii from the star. We suggest that the dust responsible for the emission fea
tures is in a steady outflow from the system. We show that the dust cannot
be located in a circum-binary disk, but is stored in a disk around the comp
anion star during the previous O-rich mass-loss phase. The duration of sili
cate emission is estimated as similar to 10(4) yr. It is compatible with th
e fact that not all J-type carbon stars show silicate emission. The evoluti
on of the central star and formation of the disk in AGE binary systems larg
ely depends on the orbital separation. V778 Cyg and other "IRAS discovered"
silicate carbon stars probably have wide orbits. In such a case, a disk is
formed around the companion. Close-binary systems such as the Red Rectangl
e form massive equatorial O-rich disks, and the evolution of the central st
ar is largely influenced by the binarity.