VB.Net on Phone 7?

It looks like it could happen, though there is no commitment that VB.Net will be in the released kit. There is now a CTP supporting VB.Net to help Microsoft test the waters though:

Windows Phone + VB developers = Great Mobile Apps

Also see Visual Basic Comes to Windows Phone 7.

As far as I can determine this is only for the vapor-ware platform (Phone 7). To develop for Windows Mobile you must use VS 2008 Pro or above, or 3rd party tools.