I have moved my application from WP7 (where I had no problems with localization) to the WP8. Now only English language is displayed regardless phone settings. My setup is (taken from http://www.geekchamp.com/articles/localizing-a-windows-phone-app-step-by-step):
<DefaultLanguage xmlns="" code="pl-PL" />
<Languages xmlns="">
<Language code="en-US" />
<Language code="pl-PL" />
</Languages>

You also have to modify the main project file manually and add this:
<PropertyGroup>
<SupportedCultures>en;pl</SupportedCultures>
You don't have to add your default language to SupportedCultures, see also here
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