First off, relying simply on the trusted domain system is not a wise idea. Say Cnet is in your trusted domain list, and tomorrow someone hacks into the Cnet servers, and alters some of the scripts to include malicious content? All that trusted domain security flies right out the window. There's also the issue of cross-site scripting attacks, which will tend to sidestep that trusted domain system.
Secondly... That's an awful lot of work to go to to secure Internet Explorer/Windows, when simply using something else nets you pretty much the same results.
Granted, user ignorance is probably the leading cause of all security problems, and likely will continue to be the far and away leader for quite some time. If every user of Internet Explorer stopped to think for a second before just clicking "Yes" to every dialog box that popped up in front of them, malware would be a minor annoyance instead of a growing plague. If every Outlook/Outlook Express user were to stop and ponder why someone they don't know would be sending them nude photos of some celebrity, events like those with the Melissa worm of a few years ago probably never would have happened.
Yes, Windows and other Microsoft products can be secured, but there will ALWAYS be gaps in that security, and it will ALWAYS be considerably more effort to do than virtually anything else. The reason for this is quite simple, and it's that Microsoft doesn't consider security important. It's a distant second to usability in Microsoft's corporate culture.
Now, if Microsoft were to do an about face on this, and redesign every last one of their programs, from scratch, with security on an equal footing to usability... I would be among the first to condone their actions. I would actually be quite happy to see a completely rewritten version of Windows, even if it offered no new features... Even if it had fewer features, I would see it as a very positive first step. From the bits and pieces I keep hearing from different sources, the Windows code base has gone about as far as it's going to go, and a completely rewritten Windows is likely to be the only option left to Microsoft soon. If, at that time, they take security more seriously, I'll applaud their efforts.
And for that matter, the same goes for pretty much any major program. I'd love to see the Mozilla developers scrap the current code base, and rewrite the entire browser from nothing, incorporating all the lessons they've learned thus far. Same goes for the Linux kernel, Xorg, and KDE (though the KDE developers do tend to be quite willing to toss out huge chunks of the codebase when someone comes up with something new and better). I'm not just singling out Microsoft, though they arguably have the most to prove, as well as gain.