The Windows Phone SDK 8.0 supports XNA Windows Phone game projects that target Windows Phone OS 7.1.  It does not support XNA Windows Phone game projects that target Windows Phone OS 7.0.  However, it does not block you from trying to open XNA projects that target Windows Phone OS 7.0.  Instead, it will allow you to open the projects and try to build them, and then you will see error messages about missing reference assemblies.

In order to open and use your XNA projects that target Windows Phone OS 7.0 in the Windows Phone SDK 8.0, you must first upgrade them to target Windows Phone OS 7.1.  You can perform this upgrade in one of the following ways:

1. If you do not have the Windows Phone SDK 7.1 installed, you can open your game project (*.csproj or *.vbproj) in a text editor such as Notepad and hand-edit it to upgrade it.  You will need to set the following property:
   
   <XnaRefreshLevel>1</XnaRefreshLevel>
   
   If your project file does not yet have the XnaRefreshLevel property, you will need to add it to the PropertyGroup at the top of the project file and set it to 1.  If your project file already has the XnaRefreshLevel property and it is set to 0, you will need to change it to 1.
   
   
2. If you have the Windows Phone SDK 7.1 installed, you can open your 7.0 project with the Windows Phone SDK 7.1 and upgrade it by using the menu item in the Visual Studio 2010 IDE.  There are more detailed instructions in this documentation topic.