During a Mix10 presentation, the presenter (Charlie Kindel) said that when writing Silverlight based apps for WP7 you get all of Silverlight 3.0 with some of Silverlight 4.0 mixed in.
Why then is System.Json missing? It was included in Silverlight 3.0, and is included in Silverlight 4.0.
I’m not sure why either , but it says on this link that the namespace is not supported
See Features Supported in Silverlight for Windows Phone.