Yes, Phone 7 is a completely ground up build, which at first I did not believe they could do but they did, sort of. The Zune interface style, with proper mobile interface could be exactly what they need.
For me I am not sure it will be able to pull me away from still wanting to go Android this summer. I really have taken to the Google web programs, Google Voice, docs, etc. and having a native phone easily support all that is exactly what I need. I always have a netbook with Windows on it just in case I need my Microsoft fix.