This comment from SWB posted on Slashdot about “Microsoft’s New Core OS Team Learning from Linux” I think hits the nail on the head.
Perhaps an organizational change is entirely appropriate and the right thing. I don’t think that anyone would seriously argue that MS doesn’t have any good developers.
What they seem plagued by are marketing-driven technologies that keep getting bolted on to Windows, broadening the code base and making the overall focus of the development harder for anyone to see. This level of integration may make IIS faster or enable easier functionality for some third party development, also makes it hard to define what Windows core is and who’s responsible for it.
A group of developers focused on the core of Windows (kernel, networking, filesystem) should be able to better focus on making it work well and keep security at a higher level, among other things.
The real challenge will be who defines what the core of Windows is, and what they define it to be. If they allow the scope of Windows core to be everything you get in C:\ after installing the OS, it won’t be more than cosmetic. However, if they define it succintly and at least internally acknowledge that the kernel, the filesystem and the networking code is the core, and other stuff like IIS or Internet Explorer is not, this could mean real benefits for Windows.