Charles Petzold discusses the ability of Windows Phone 7 application to access and play music files.
Source: Petzold Book Blog
It is possible for a Windows Phone 7 application to access and play MP3 or WMA files that are stored as either content in the application or referenced over the internet. Such a file becomes an instance of the Song class that you instantiate with the Song.FromUri method. The URI references the file.
Song is an XNA class but you can use it in a Silverlight program. You'll need a reference to the Microsoft.Xna.Framework DLL — ignore the warning message; you are, after all a trained perfessional and you know what you're doing — and you'll want a using directive for the Microsoft.Xna.Framework.Media namespace.