Not only does Mango support Silverlight 4, there are also numerous updates and improvements to Silverlight for Windows Phone. A bunch of work has gone into compatibility between Mango and Windows Phone 7, however you should test your existing applications on Mango, to make sure they behave as expected.
There are a few known differences in the behavior of Silverlight API in comparison to the same API in Silverlight on Windows Phone 7. When the docs are published for Mango, you will be able to see these changes in the Version Notes section of the relevant API page. Following is an example of the Version Notes calling out a difference in Windows Phone OS 7.1.
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