Now I'm looking for a good idea to make it into an app. Hopefully I'll find some more use of my Omi as I like to call it.
Later search revealed that WP8 SDK can be used to create and deploy WP7 applications as well. But it's another 1.6GB download so I am sticking with my current VM setup as it is.
So I decided to keep the existing WP7 SDK install since I can use Application Deployment tool from it. I created a new Win7 VM in VirtualBox, and installed the WP7 SDK in there. After installing SDK, I created Hello World app which was straight forward. Then I thought I would deploy this to the phone directly. But this didn't work. Somehow the Win7 VM would error out on attaching the phone as a USB Peripheral. And I had run out of patience by then. So I copied the created xap to Host Win8 system and used Application Deployment tool from there to put it into the phone.
There I ran into a few problems and I had to run circles to find solutions / workarounds for them. The first problem was I had WP7 sdk which is incompatible with Windows 8 (which is my current desktop OS of choice along with elementoryOS). So after looking at a few workarounds for the incompatibility which involved downloading a few update packages and messing with the system. I discarded them since I didn't want to mess with my Win8 installation which is already finicky enough.
Recently I unlocked my Samsung Omnia W which I previously upgraded to WP7.8 using Heathcliff's unlock for Samsung second generation devices. Afterwards I got hold of some xap's and deployed them to the phone to test out the unlock and things worked out quite well.Thus now I have a device that I can code for and put my code in. So just to test the development environment I tried installing the SDK and coding a simple Hello World app for my wp.