When I entered into the WP 7 development using the WP7 emulator, the first annoying behaviour noticed was the unavailability of machine keyboard support in the emulator. I had to use the visual keyboard popped up by the simulator. Our Windows Phone 7 application has integration with Azure and ACS which requires authentication every time I run the app. In other words that was the only part which really needs keyboard input. I don't know why I didn't google to get the keyboard support .May be I was in bad impression that the simulator always simulates in the real way.
Days passed and the schedule became tight .Accidently I press on a key and I could see that it is accepting the physical keyboard entries. This made the development easier and didn't get much time to bother about the key which made that magic. Later the week I had to restart my machine and could see that the emulator is not at all accepting the keyboard. This made me to google for that magic key and it was "Page Up".
Yes really there are some keyboard short cuts. Have a look at the below page for details