Jon, they say to migrate to Windows 8 and build for WP8. But I dont see the point as RMS still produces a plain vanilla app that doesnt support live tiles, metro interface etc. If you pin 2 apps, they both show as a gear icon with 'Rhodes' written on them, which makes it difficult to identify which is which.
They say support for WP7 is deprecated, but was there any support at all in the first place? I found support is flaky at best. It'll be interesting to know how many apps are out there built with Rho in the windows phone store. Why not have a poll on launchpad?
So, I think you can go with Windows 7 and build for WP7 using (good old) Rho Studio (RMS not required) with VS2010 express or pro. Also, be prepared to do some tweaking before the app can be hosted in the app store. App will show target is WP7,WP8 ,WP8.1 in the app store. I use the command line to generate the XAP, and deploy it to the emulator. The emulator is nice, I like it. I deploy using dev center to the store as a beta for testing on device, so no unlocking required.
I built an app successfully and deployed it to the store (still in beta form, though). You can grab it from here : http://shillong.meg.nic.in/nec
BTW, that link requires your phone to be unlocked to deploy the XAP. You can unlock WP7 phones only until 31 December 2014! In case you need the beta from the app store, create a Windows Live account if you dont already have one, give me your account email, and I can add you as a beta tester. That way, you wont need to unlock your phone, app will install on WP7 and above.
And whats nice is Microsoft has made it free for deploying apps in the store.