Just weeks after the launch of Windows Phone 7, Chris Walshie, an Australian developer successfully able to run "native" unmanaged code on a retail WinP7 device. The pieces started falling into place when user "hounsell" on xda-developers.com noticed the a 3rd-party app in the WP7 marketplace (Network Profile by Samsung) used "native" code, not Silverlight-managed code as all non-Microsoft apps should.
The app has unmanaged DLL's inside the XAP file!!!
Upon closer inspection, he documented some interesting characteristics of the app that gave it its native capabilities -- most notably a DLL called "Microsoft.Phone.InteropServices", which if poked the right way provided COM access.
Building upon this, Chris successfully build and deployed a valid WP7 app using developer sideloading process to a WP7 device that inherited the ability to run unmanaged code.
Although this breakthrough pretty much provides root access to the core of Windows CE-based system including registry and file system necessary for future jailbroken apps, the last and major piece of the jailbreaking puzzle remains -- sideloading an app on a common non-developer device, since such an app would never make it through marketplace certification.