Long time Microsoft watcher, Mary Branscombe, goes into detail over on ZDNet. Starting with the visible update of the Start screen, she wonders what else 7.8 could feature. Nokia's suite of applications are likely to be ported to run on 7.8 as well as Windows Phone 8, but will we see the Wallet application, even without the NFC hardware, making an appearance? Background tasks, including turn by turn navigation might also appear. There's a lot unsaid that could make 7.8 a very interesting release.
We're sure to hear more on the 7.8 update list as the year progresses, but Branscombe finishes with a rather pragmatic view:
You don't have to like the idea of not getting an upgrade to Windows Phone 8 to understand why it makes sense. But it doesn't mean that the Windows Phone you bought last week or last month stops working or stop getting any new features or new apps. If you wait six months there will always be new and better hardware - so you lose the benefit of having a new system for six months and at the end of it there's another shiny object for you to think it's worth waiting for.
Pretty much says it all, but there's more in the full article.