You're entirely right, but they need to maintain Windows in order to promote those services. The OS and their various applications have a symbiotic relationship where they prioritize each other.

If Microsoft discontinued Windows and switched to just providing web apps, the competition would be a lot stiffer.

"maintain" meaning keeping it somewhat workable or actually improving it?

ATM windows still has enough of a moat that they can comfortably do the former.

I believe Microsoft can skate for a long time with just bug fixes and security updates. It makes the drop in Windows' quality all the more baffling.

They literally tried that strategy with Internet Explorer 6 a long time ago where they didn't really update it for years, only doing the bare minimum. The result was a downward spiral in market share that they were unable to stop once they started trying again, ultimately resulting in IE effectively becoming obsolete.

Because browsers are one of the very few components that actually need to catch up to the rest of the world, but they've already outsourced most of that work to Chromium.

True but it is still their moat. Without windows they will lose a lot of appeal to their cloud products like Intune, Azure AD, M365 etc

Yup. The same thing is happening with Apple. With software mostly moving to the cloud, operating systems are getting short shrift.

If this is the case, Windows seems like it should be very important. Otherwise they can't deliver their subscription services. I'm not going to subscribe to cable TV if my TV is broken.

It just has to be good enough to be able to deliver the service.

Their moat, for now, makes this possible.