One of the things that came out of 'DDD10' was the fact that the forthcoming Windows Phone 8 tooling, including the emulator, will only run on Windows 8. This emulator will also be needed to test Window Phone 7.8 (the update to Phone 7 that brings it as close to Phone 8 as possible).
So, if you want to use the emulator to test sites and apps on Windows Phone 7.8 and 8, you'll need to be working on Windows 8.