Use the built-in sound compression of the XNA content pipeline!
The default value for the SoundEffect content SoundEffect is the best compression quality (which, apparently, is not compression at all). Set the compression quality to Low and you will get a much smaller file. Or "Medium" for a good balance between size and quality.
To change this parameter, select the .wav file in the solution explorer, press F4 to open the properties window, expand the "Content Processor" node and change the compression quality setting that appears.
Here are the instructions with screenshots:
Create a new WP7 XNA game project (or else get an XNA Content Project)

Add the wav file to the content project:


Press F4 with the wav file selected in Solution Explorer to open the properties window.

Expand the "Content Processor" node and change the compression quality to the desired setting.

The Best setting gives no compression (raw waveform), the Medium and Low settings give a much smaller file.
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