Yes, you can develop applications for WP7 in Silverlight or XNA.
Silverlight on the WP7 platform is based on Silverlight 3 at this stage with some inclusions / exceptions that are suitable for the mobile platform.
In Mix 2010 and Tech Ed 2010 NA, there are some good introductory videos in keynote speeches and breakthroughs that provide good knowledge.
There is also a message that clarifies what is best used for which types of applications.
Mick n
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