that's just it... almost anything interesting you'd want to do is "custom dsp". xna can do mixing, volume, panning, maybe a couple different types of filters, but i couldn't find any help with building a virtual synth, spectral shaping, custom effects or even an event model that supports midi. midi is 25+ years old! the "close to the metal" game loop and dsp in xna supports gaming and gaming only.
since native code is not supported on wp7, i'm afraid we'll never see the type of compelling creative apps on it like the iphone. on my iphone i have nanostudio, sunvox, and a 4-track recorder... arguably more power than the beetles had, in my pocket.