The Phone 7 App Store only allowed Silverlight, XNA and .NET applications, C++ apps were only allowed by close partners. Thats because CE didn't have a robust security framework or process isolation. This is fine on non-networked devices like the ones in the 90s you referred to because the worst that can happen is crashing the device, but once you have constant network access you need to be a lot more careful about allowing direct access at the system level. A badly behaved app could play havoc with the network, especially since the network stack on CE was pretty primitive with few safety features.

Also early CE devices were aimed at technical users that knew how to side-load apps and were much more tolerant of technical issues, but the later phones were aimed at ordinary consumers and so needed to be as reliable as possible. Hence the restriction to managed framework dev environments for general developers releasing to the App Stores on version 7 and below.

This is why Apple could open up their App Store to any developer with basic review, because the system was heavily locked down with robust system security, process isolation and networking models. Windows Phone didn't have that until version 8 in 2012, based on the NT kernel, and that's when the MS App Store started accepting apps developed in low level languages. That wan't a co-incidence or a capricious decision by Microsoft, but based on pragmatic considerations.