You can edit projects using both Visual Studio 2010 Express for Phone as well as with Expression Blend for Phone (which is also included for free in the download package).  The project file format is the same for both tools - enabling you to create an application in one of the tools and then open it up and edit it in another.

Expression Blend for Phone provides a really powerful environment for creating interactive experiences:

It includes full designer support – including support for animations, storyboards, custom paths, and many other features.  It also uses the same phone emulator as VS – enabling you to build and run applications without needing a physical device.