I released windows phone essentials last week, and I have the mango tools installed, so all seemed fine. Then when a friend of mine tried to install the package they got the following error:
Unable to find assembly references that are compatible with the target framework 'Silverlight,Version=v4.0,Profile=WindowsPhone'
Hrrm that blows. As you may be aware, Windows Phone 7 runs a version of silverlight known as Silverlight 3.7. NuGet recommends that you use the lib\SL3-WP for windows phone projects, but if you install the mango tools, this will change to SL4-WP. On top of that if you create a project targeting mango specifically you need to put your library into SL4-WindowsPhone71. It seems that NuGet 1.4 will replace WP with WindowsPhone, but I am not sure about previous versions.
My workaround at the moment is to just specify all of them until there is some official documentation:
lib\SL3-WP\WindowsPhoneEssentials.dll lib\SL4-WindowsPhone71\WindowsPhoneEssentials.dll lib\SL4-WindowsPhone\WindowsPhoneEssentials.dll