Why not? IE9 mobile even has new default styling to make websites better match the WP aesthetic.
I tried doing it for the iPhone (html/javascript, showed in a WebView) -- the experience was horrible for an interface that featured only a couple of text inputs and 2 buttons. And on Android it was even worse.
Browsers for mobiles (WebKit mostly) are very buggy and even have extra restrictions that desktop browsers do not. I doubt they did a better job with the engine on WP7.
So apps for WP7 are going to be built with Moonlight?