I cannot see them giving up client-Side Silverlight that easily; controlling the whole stack is an advantage for them just as it is for Adobe (if Flash is king, Adobe sells tons of developer tools, and possibly licenses on mobile devices) or Oracle (with java).
So, I expect their strategy is to have a full Silverlight path where supported, with a fallback to HTML/SVG/Canvas when needed. If so, Windows 7 Phone phones would currently have more need for a good Silverlight implementation than for good/full HTML5 support.
If Windows 7 Phone phones manage to gain traction, the business strategy could then well be to decrease effort on the HTML5 fallback path.
So, I expect their strategy is to have a full Silverlight path where supported, with a fallback to HTML/SVG/Canvas when needed. If so, Windows 7 Phone phones would currently have more need for a good Silverlight implementation than for good/full HTML5 support.
If Windows 7 Phone phones manage to gain traction, the business strategy could then well be to decrease effort on the HTML5 fallback path.