Windows’ official announcement says that existing Windows Mobile applications can not be used for Windows Phone 7 handsets platform. This is the answer of the rumor about the compatibility cord between those two platform. Furthermore, Charlie Kindel, Microsoft Partner Group Program Manager for the Windows Phone Application Platform & Developer Experience, says:
“To enable the fantastic user experiences you’ve seen in the Windows Phone 7 Series demos so far we’ve had to break from the past.To deliver what developers expect in the developer platform we’ve had to change how phone apps were written. One result of this is previous Windows mobile applications will not run on Windows Phone 7 Series.”