The latest numbers show WP7 actually declined a bit; nothing kills developer interest like a shrinking market. Sorry to be a pessimist, but unless Nokia takes off like a rocket - straight up - I think the handwriting is on the wall. MS just buried Zune, and there's lots more room in the crypt.
They didn't bury the Zune; they buried the Zune hardware. They still heavily promote the software. Honestly, as much as I love my Zune HD, sticking to one platform is smarter. You can keep all your dev's in the phone department, and not have to worry about constantly catching up to iPods in the solely-a-media-player market.
Plus, even despite the lack of further hardware support, they just released a batch of new apps and games for Zune HD just a few months ago. I wasn't expecting that at all, but I was delighted. Add in that they're offering a new option for Zune subscriptions now and gave the WP7 Zune UI a lovely overhaul (finally adding in Smart DJ as well, thank God), and I think it's safe to say MS is sticking with Zune for the long haul. And considering how much they've already invested in transforming their phone line, and you can bet that they'll be sticking with the WP7 product for quite some time.
Remember, the original Xbox never, ever turned a profit. Its main objective was to simply keep Sony from dominating the market. The Xbox 360 eventually turned a profit because MS stuck with it, and now holds the greatest market share in the US since the decline of the Wii. The WP7's current state is not unlike the original Xbox's.