Surely it's simply about funding?
Who's gonna fund about 20-30 people to write a desktop OS opposed to Windows? Who's gonna fund 20-30 people to develop a new hardware platform opposed to x86?
They ARE being funded for DE however. Shame is they are ahead of the trend, as CDTV was, PDA and handheld games WILL take off massively, it is a matter of when. Bill M stated they have reference hardware designs that are amazing that they can't built due to financing and resources.
I know it sucks buts that's how it seems to me, a few million sales of DE stuff = a few million bucks. Maybe the M$ name might garner the robotic "Mmmmm M$ it must be good" response in sheeple?