"In terms of core features, maybe, and even then I'd probably disagree (where's my tethering? where's the ability for apps to communicate other than through the 'cloud'?)."
The Mango update will support sockets. Currently Windows Phone 7 supports http, and does not need to go through any cloud services to communicate to the web or any generic web service. Tethering is another issue, probably won't be part of the Mango update, and is driven more by carriers than anything. Even android's tethering is under pressure from the carriers:
http://www.pcworld.com/article/226905/android_tethering_free_ride_is_over.html
"In terms of apps, it's still very lackluster. This is largely thanks to the inability to port existing C/C++ code from other platforms"
Apps for smartphones are usually written from scratch in their own native environments. No porting occurs from non-smartphone c/c++ environments for almost all smartphone apps.
"Then, of course, it's not like Android (and iOS) are static. While WP7 is catching up, they move ahead even further."
There is a certain subset of features which provide most of what most people want from a smartphone. Mango will provide most of that, and it's unlikely that anything revolutionary will be thrown into the ring on other smartphone environments any time soon. Some would say that the development environment for Windows Phone 7 is a feature which gives it an edge in the long run. It's surprisingly elegant compared to it's competitors.