The first eee was a revolution because of Linux. How could they possibly think this is a good move? Besides the rather beefy cheque I imagine Microsoft has tempted them with... getting scared of the OS market moving away from a monopoly. Damn, I hate Microsoft
I'm also used to anticompetitive business decisions to mute Linux. Say, for instance, ACPI crippling aimed at Linux in particular (i.w. http://ubuntuforums.org/showthread.php?t=869249). Take from that what you will.
I agree Xandros did suck pretty hard. My friend who got the first EEEPC gave up on Xandros within days and install a modified version of Ubuntu customized for the EEEPC.