This entire essay hinges on the assumption that Microsoft's priced Windows (and Office?) inefficiently. Implicitly, it may also hinge on the presumption that the true dollar value of OS software is basically zero.
I'm not so sure on the first, and I know the second is plainly false. For the average consumer, the switching cost associated with moving from Windows to Linux is quite hefty relative to buying a new copy of Windows 7...
So what's the cost for the average consumer of moving from Windows to GNU/Linux or MacOS X?
I guess Microsoft probably sells more licenses to BigCo than to natural persons these days, and for them the switching cost probably is non-negligible, owing largely to investments in custom Windows software. Maybe when you say "consumers" you have in mind a random sample from all Windows customers.
As for "consumers" in the vernacular sense of natural persons, I think the cost of switching from Windows to MacOS X or GNU/Linux is not more than the cost of moving from Windows to Windows. The main thing I've seen is that they have to copy their data from one machine to the other, and/or decide what to throw away. The second major cost is relicensing their old apps, which they do anyway because they might as well upgrade.
There is no such thing as an average consumer. There are power users who use a bunch of little Windows-only shareware applications, who would truly be in for some pain as they had to relearn everything if they switched to Linux, and then there are people who just use Firefox, who would hardly notice the difference.
Why would you lose files because you switch to Linux? When I switched I just put my old windows hard drive in my computer and copied them - which is the same thing I would have done with a new Windows installation.
I don't know if that's still possible. That was in the FAT32 days. But I'm sure that it's still possible to transfer files from one computer to another.
At the expense of Window 7's market penetration, which I imagine is the primary concern right now. They need the latest OS version to be a necessity, not a luxury.
MS has pretty standard schedules on which they "discontinue" software, and it's not short. MS would like to stop selling XP now, that's likely to happen when Windows 7 ships, unless there's a commercial reason not to.
As for support, wikipedia says "Windows XP Service Pack 2 will be retired on 13 July 2010, almost six years after its general availability ... On 14 April 2009, Windows XP will begin its "Extended Support" period that will last for 5 years until 8 April 2014"
I'm not so sure on the first, and I know the second is plainly false. For the average consumer, the switching cost associated with moving from Windows to Linux is quite hefty relative to buying a new copy of Windows 7...