Seems that JSON is supported in Windows Phone 7 in the System.Runtime.Serialization.Json namespace, hopefully this will be useful, even though this question is a month old!
Information from the TechDays in London (via Twitter) was not there personally.
Just an update is that the namespace and class I quoted here was incorrect so here is the correct namespace and class:
System.Servicemodel.Web and the Class is DataContractJsonSerializer for JSON Serialisation and Deserialisation on Windows Phone 7 - sorry about the inaccurate reply I have corrected after a comment posted here.