I love the people hub in WP7 in that it transforms the old tired contacts app into something more alive. I haven’t seen how WP7 will handle favorite contacts, so the concept above tackles it by having recent contacts in a smaller size row of tiles, and the favorites below that in normal sized tiles. I think this makes it more practical to have both, and saves from having to pin more contacts on the start page. The favorite contacts updates also appear more frequently on the what’s new section.
Please note: I bet a better designer could make it look less cluttered but you get the idea.