The build list should not be empty when adding a link from the .NET tab even for a Windows Phone 7 project, so it looks like you might have a problem with Visual Studio.
However, you can try using the browse tab instead. On my system (64-bit), the assembly is located in the C: \ Program Files (x86) \ Reference Assemblies \ Microsoft \ Framework \ Silverlight \ v4.0 \ Profile \ WindowsPhone folder.
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