Microsoft’s latest update to its emulator for the still-in-development Windows Phone 7 platform shows some ongoing refinements, and a hint that Microsoft may be nearing a “release candidate” version of the OS, after which major changes are unlikely. And hackers unlocking the latest Windows Phone 7 emulator are trying to delve into the underlying kernel and understand a range of technical issues such as memory management.

“Microsoft knows that the emulators are typically unlocked by users,” says a PR agency spokeswoman assigned to the Windows Phone group at Microsoft. “That’s why they have been very clear that the emulator is based on early code and is not reflective of the final user experience. Windows Phone 7 is still under development and we don’t have further information to share on new features.”

The emulator program lets developers start building and testing Windows Phone applications now, since actual phones with the new OS won’t be released until the “holidays” period this year, probably in the Fall. The emulator mimics on a PC screen the look, feel, and behaviour of an actual Windows Phone. To do so, it includes Windows Phone 7, which is the UI layer that runs atop the underlying Windows Embedded CE kernel. Microsoft has said the radically redesigned UI, dubbed Metro, is using a new and expanded version of CE, but so far it’s said almost nothing about the changes or improvements to the kernel.

The new emulator and updated Windows Phone 7 code is contained in the April refresh of the Windows Phone Developer Tools Community Technology Preview (CTP), in effect, a public beta test release. The initial release went live just in at Microsoft’s MIX Web developer conference. One of the emulator screens, posted at PocketNow.com among other sites, has the following information: “Software: Windows Mobile 7.0 6176.WM7RC1Escrow(buildlab).20100406-1457”

What bloggers and developers have picked up on is “RC1” though many have overlooked the term “Escrow.” In a statement, all Microsoft will say is “The recently refreshed Windows Phone Developer Tools CTP includes release candidate 1 code. We have no further information to share regarding when Windows Phone 7 will reach RTM [Release To Manufacturing].”

The term “escrow” has been used at Microsoft for years, writes Paul Thurrott, the news editor at Windows IT Pro, and creator of the Windows Phone Secrets blog. It “means that if it [the code] passes certain quality criteria it will be declared the actual release candidate 1 build. If not, fixes will be made and the build will be incremented, and they’ll try again,” he writes. But he considers the April build to be a “near-final look” at the new smartphone platform.

Thurrott has posted at his SuperSite for Windows blog nearly 70 Windows Phone screens from the refreshed emulator, often with several from each application. The images give a broad overview of the UI’s look and feel, though they don’t give a sense of the various “hubs” that Microsoft uses to collect and order content, or the navigation between these.

One set of three images shows the voicemail screen, the phone dialer (a minimalist set of dark gray rectangles), and settings for the voice features. Another set show screens from contacts, dubbed “people” in Windows Phone, including adding a contact, and adding online accounts such as Windows Live or Facebook.