[FlatSurfSucks]

It will be based on Windows CE. Even the Zune HD is Windows CE at it's core. It will be binary compatible, no doubt about that. There's no way MS develops a new kernel for WinMo 7.

Now will everything work? Probably not. I'm sure they'll have a new sensor SDK and probably a new location system. There will likely be gesture support, etc. Not sure if they'll support WinForms. If they don't it will break a ton of apps. Honestly I don't see why they wouldn't. Winforms will no doubt be a component of Windows CE 7 (there's no way they ditch it entirely as enterprise/embedded apps will no doubt still use it). That doesn't mean they will use Winforms in their interface. I wouldn't be surprised if it is XNA driven with some variant of Surface API's thrown in for gestures. They'll probably support XNA for development, similar to Zune HD if not the same exact code/APIs as the Zune HD. Basically I'm thinking there will be a LOT of copy/pasting from the Zune HD to WinMo 7 except WinMo will retain full .net compact framework support.

As for the rumors about 2 versions... the "enterprise" version will probably just be WinMo 6.5/6 or whatever number they feel like giving it while WinMo7 will be based on CE 6 or 7 (WinMo 6.5 is still based on CE5 while ZuneHD is 6). CE7 will be out later this year so they may just go ahead and use that.