XDA Developers forum user fiinix has brought on-screen captures to Windows Phone 7, something everyone (especially us bloggers) desire more than above all else, as a homebrew solution. While requiring the dehydration hack, this app contains the setting to toggle whether it's active or not (preserving battery life).

Here are the provided instructions:

  1. Open up the app
  2. Navigate to the app/screen you want to capture (no more than 2 apps in between (this app will be killed by "Watchdog"))
  3. Hold "focus" (not click, >focus), for at least 500ms
  4. Wait for messagebox to verify capture
  5. (SUCCESS) > Located under "Pictures > All > Saved Pictures"

You can download the screen capture app and find out more information over at the thread on the XDA dev forum.

Source: XDA Developer Forum, via: WPSauce