I was there for this celebration. It was all in good fun. The funeral was such a small portion of the day, it's being way overblown. It was like 15 minutes of an all day carnival. There was games, monster trucks to ride in, live music, and all other kinds of celebratory stuff going on (face painting ftw!). There was an all out party going on.
I'm on the Windows team, but the WinMo7 guys worked their asses off and actually made something pretty friggin cool. They deserved to party.
As for Microsoft's chances in this market, people never thought Microsoft would dominate Sony in video games. I wouldn't count Microsoft out just yet... it'll be interesting to say the least.