We were told that there would be Xbox Live integration in WP7 but the exact level of integration has been a bit of a mystery. In a recent conference call Andy Less stated the following:
We are very excited about the way in which the platform works across screens, so we have commonality of platform across the PC, the Xbox, and the web and the phone. We provide a new set of tools that makes it easy and very fast for people to develop applications for the phone but also in a way that works across screens, and we’ll announce details of that at MIX. You’re also right to point out that a marketplace is included, and the marketplace will work for applications but also for games, so the gaming marketplace for the first time will utilize Xbox Live, and that enables you to create multiplayer, multiscreen games, and the marketplace will facilitate that, so that it will actually work across screens.
If Microsoft develops tools so that someone developing an Xbox 360 game can also release it for WP7 and just have to do some changes to resolution and controls then that would be a dramatic shift in landscape. The number of high end games available for WP7 would explode and with Xbox Live support it would really be a home run. And this is something that no other phone OS could compete with. Now obviously a phone with a 1ghz integrated chip cannot have the same experience as an Xbox 360 with a 3.2ghz CPU and dedicated sound and graphics chips, but if the experience can be carried over with a bit trimmed (the screen size is obviously a lot smaller and we don’t need all of the sophisticated architecture on such a tiny screen) well I’d be very happy. Of course, there better be a way to use an Xbox gamepad because with only 3 physical buttons there’s no way you can compete in Halo:)