The Windows Phone team have posted to their blog about application updates with a couple of useful points:-
From October you will again be able to publish updates to your 7.0 apps independently from 7.5 (previously once you had published a Mango update your 7.0 app would be locked). It does mean potentially being in limbo for a month but at least you are not stuck completely with no way of updating a 7.0 app. This is important as it will take some time before many users will have the opportunity of upgrading to Mango.
When submitting apps there is only one description for both versions of your app so you must describe which features are for Mango only. For the purposes of Screenshots there is now an officially accepted overlay which can be used to indicate Mango-only functionality. You can download a ZIP containing the overlay and examples here:-
The full blog post is here:-