The advent of Windows Live (a version of the pre-existing beta Start.com) confirms what we already know: the Larry Ellison vision of a "network computer" is here. (Further proof: the coming Wal-Mart US$398 laptop.)
Whatever the relationship, ultimately, of these new, Web-based tools to MS Widows or Office it's clear that more and more of the heavy lifting is happening online and not on the desktop. The shift to Web-based e-mail is just the probable tip of that iceberg.
Here's Charlene Li's (very favorable) post on the new MS "Live" strategy and why she thinks it will succeed.