James,
It would be helpful if you would elaborate on our judgement that .NET is a nightmare. .NET is a tremendous success in terms of quality and adoption. Time will reveal to you that this is true, regardless of what you think now.
You imply that WinFX is vaporware, yet thousands of developers are working with it right now:
http://msdn.microsoft.com/winfx/
Maybe you should try it sometime.
You should know that WinFX will ship for WinXP; indeed that is a big reason why the Vista work was rationalized.
In 5 years time, Microsoft's grip on the software industry will only tighten. You will look back on ignorant posts like this with shame.
This post hardly dignifies a response, but here goes. Microsoft is currently phasing out Win32/COM for application development in favor of WinFX. Based on .NET, WinFX is the new application-level API that will address the concerns brought up in this thread. Microsoft launched the initiative years ago with .NET. Today, .NET is the predominant platform for new application development on Windows. Therefore, Microsoft is well on its way in solving the alleged 'crisis'.
To address the question of Windows in the embedded space, consider the success of Windows Mobile and XBOX.
Singularity
Singularity