No, Windows Phone 7 is version 1 of Windows Phone.
Windows CE 6 was the predecessor and it's nothing like Windows Phone. Completely separate products sharing only a kernel. And Windows Phone 8 doesn't even share the kernel.
FFOS brings three things to the table that noone else has and they are:
1. Price. They are dirt cheap. Most people out there can't afford to throw out what $600-800 on a handset. The only thing that is keeping these phones afloat is the telco contract that is subsidising the handset cost. Apart from the US, the rest of the world is pretty much handset and/or phone i.e. you can choose. I ALWAYS buy non locked handsets in cash and use cheap contracts. This is almost standard in Europe and the East. The only way paid up handsets can go is down and that's going to simply fuck up the market for high end devices. Giffgaff in the UK is demonstrating that - people are paying virtually nothing and buying cheaper WinPhone (620 is cheap!!) and budget Android handsets these days.
2. HTML. Yes HTML+JavaScript. Every monkey can knock out apps for these, much like you could with MIDP2 / J2ME. You don't have to be an expert on reference counting in Objective-C (iOS), navigate thousands of pages of SDK documentation (Android/WinPhone) or have to own a Mac to push apps out (iOS). You also don't have to subscribe to some massive store model and subscription development model (WinPhone/iOS). Just a second hand laptop ($100-200) text editor ($0) and a cheap ($79) handset and you're throwing out apps.
3. Reuse. A lot of apps can easily be repurposed for this development model. They can also be upscaled to web sites as well.
Hell, this is the scariest thing out there: cheap, easy with the potential to reuse stuff out there.
These WILL be ubiquitous.
As for: "no instagram". Instagram is a fad. It's not going to be around for years and years. If it pissed off tomorrow, noone would cry. Hell most people forget about it after a few days.
As for the iPhone's "isn't it cool" comment, hell it's a piece of shit to develop for, especially when the SDK documentation and publishing platform buggers off for a month and they treat their paid up customers like crap...
These will start at the bottom of the market (like Android) and will push upwards.