Well, yes, the desktop has improved. Ubuntu has been a great progress in linux. It is getting to the stage that for people who like windows, linux is almost there as a free windows. So lots of clever creative people have managed to recreate a version of windows, but more open, which is great if you like windows.
Doesn't really move the party along though.

I didn't know what the compiz-fusion was, so I did a search and saw a youtube demo. Sure enough, lots of deforming cubes, and rotation and fancy effects. One thing I didn't get is, why? How does that help anything? OK, the geek in me loves the graphics, especially having done graphic programming before, but one of my loves is user interfaces and I didn't see anything in all of the compiz fusion demos that made the user interface better to use, or friendlier, or any more obvious. I watched the windows zooming round, and my thoughts went back to talking my mum through trying to download a scanner driver from the web. I am glad my mum doesn't have that!

No, I agree, there is nothing in the FOSS model that would make it unsuitable for end user software. In fact there is no reason that it should be any different for software than commercial software, if it was made the same way.

The way I see these things are that there are two reasons for doing things. One is for love, and one is for money. Both are valid (and both need to exist). For money I write document processing and display systems (electronic documentation, that sort of thing). For love I write little games, little utilities and graphic stuff. Although I enjoy my day job, I don't think it is exactly what I would do for love, so from my point of view, it wouldn't get done without the money.