Whilst I agree with many of the comments in your news story regarding Longhorn, I have the following observations:
With Longhorn, Microsoft is borrowing from the success of HTML as a declarative language for defining a user interface (UI). It is introducing Extensible Application Markup Language (XAML), through which you can define the UI which can then be rendered on a "fat" client or a browser.
The implications of this strategy do certainly blur the lines between Web and fat ("rich," to use Microsoft parlance) client applications.
You write that "to date, Microsoft's .Net Web services technology has not been the overwhelming success the company had expected." Perhaps it's not up to Microsoft's expectations, but it's a success, nonetheless.
Also, you write that "already, as Microsoft Chairman Bill Gates told CNET News.com, the company's consumer-oriented initiative, .Net My Services, has been largely reborn as part of Longhorn. The plan, designed to tie individuals and consumers more tightly to Windows through a series of paid services, had been largely abandoned earlier because of partner resistance and concerns over privacy."
This is not really the case. When Microsoft launched .Net My Services, it envisaged that enterprises would let Microsoft host the services for them. Instead, enterprises wanted tools to develop the services and either host them themselves or let Microsoft do it. What Microsoft is doing with Longhorn is providing the capabilities to build them, through the Indigo Web services communication framework and the extensible schema in WinFS to define the data models, and so on. So, .Net My Services--as was--is not in Longhorn.
Research Director, Ovum