Win Phone 7 isn't a bad mobile OS, anyone who has used it will tell you it's not all that bad. But it's still a day late and a buck short and it will never even dent iOS and Android market share.
Nokia is in a hell of a spot with how rapidly their losses are stacking up, despite still being the most used brand of phone on the planet.
However, one thing Nokia always did right was hardware. Anyone who has used the N8 and virtually all of its' more recent smartphone predecessors will tell you it's a great phone, hardware wise. A little on the fat side physically, but the Zeiss lenses/cameras they are putting in them are simply stunning.
Nokia putting bank in Win phone 7 is however, a mistake. The OS is nice, completely usable by anyones standards, it just won't ever be a formidable threat to Android or the iPhone. They are putting their money on the wrong horse if they are solely going to be offering WP7 handsets.
I wish they had gone with Android - an Android/Nokia phone would be a hell of a piece of kit if done right.