Nokia is not going to sell WP7 devices. If they suddenly dropped Symbian and switched to WP7 they'd go from selling 25M+ smartphones per quarter to selling 2.5M, and they'd pay licensing fees to do it too. Why would consumers want to jump from a well-established OS with huge global reach to a fledgling, unproven one with a VERY murky future given the level of competition that's out there? Going to Android would be a slow death for Nokia. Going to WP7 would be jumping off a cliff.
Even if Nokia only added WP7 devices to its portfolio, that'd simply be a research, development, service and warranty burden for products that likely would sell very few units and not really add much to margins or even revenues given the additional costs of licensing.
Microsoft also isn't going to buy Nokia. They probably have very little interest in entering this market from a hardware perspective and, like I said, I'm sure they realize that buying the company and slapping their OS on it would damage the Nokia part of the combined business more than it would help the Microsoft part of the combined business.
Nokia is at least partially a takeover target, IMO, but not from a software company. The given example of Cisco is an interesting one. I have no doubt that Nokia would like to spin off the Nokia-Siemens joint venture and someone like Cisco might be an interested buyer at the right price. As for the mobile phones, well there are several companies who might potentially be interested but I'm not sure that any would ultimately pull the trigger.