A Windows Phone 7 developer called Vangos Pterneas has created a facial recognition system for WP7 based devices.
The new system uses the Facelight libraries that are open source.
Using Facelight is a piece of cake. You only need two XAML image controls placed in the same position. The upper one (named ImgResult) will contain a red ellipse specifying the recognized face and the other one (named ImgOverlay) will contain the original bitmap source.