After watching a little bit of the summit keynote I kind of heard conflicting reports about it, but is it official that XNA is being dropped for WP8? I'm guessing since the future version of WP supports previous generation of apps that this is probably not true.
If it is though is using C# even an option for games or is C++ with DirectX the only way to go?
I'm sure it's too early to speculate on this at this point, we'll see when the SDK is released. But from what I've seen so far - I would say yes, XNA might not be officially supported WP8 and onwards (read - new features will probably only be available via the DirectX interface, but existing features will continue to be supported). However, according to this thread, games that use Monogame to run on Windows 8 metro will pass certification. So in one way or the other, the platform will not die.
Edit: I just noticed this tweet from Shawn Hargreaves: Windows Phone 8 runs all 7 apps including XNA ones. We're adding new features (native code, D3D) not taking away old ones