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I'll go one further and say that XP was never needed.
XP was basically window dressing on Windows 2000, which WAS sorely needed.
NT4, the first mainstream implementation of the NT kernel and was sorely lacking. It lacked plug-and-play support, power management, and even simple things like USB support.
When 2000 was released, it was a huge improvement. It had all the usability of Windows 9x, but the stability and robustness of NT4. In fact, Microsoft had originally planned to make a Home version of Windows 2000, but at the time, there was some concern about compatibility issues (many 16 bit applications didn't play ball with NT).
So, instead, they waited a couple of years, gussied up the UI of 2000 and threw in a few mostly useless apps like Windows Movie Maker and improved boot time and called it XP. That's not to belittle XP, as it was a fine OS in its own right, but it was mostly a minor revision to Windows 2000.
When Windows Vista was initially announced, there were some major initiatives that were supposed to substantiate the product. Palladium (a new security platform), WinFS (a new file system), and Aero (a much needed ground up rethinking of the GDI) were the whole reason for Vista to exist in the first place. When MS more or less dropped the first two, in an effort to get it out the door faster, that was the first nail in Vista's coffin.
I'm convinced that Windows has simply become so big, bloated and convoluted, that further development is like trying to turn the Titanic. I feel very strongly that it's time for Microsoft to rethink NT altogether... and the right decision (GASP) might even be to adopt a Linux kernel.
Of course pigs will fly first, but I do think that would be the best decision for MS at this point. They have no experience with building an OS from the ground-up (keep in mind that DOS was bought from another company and NT was co-developed with IBM), they might as well adopt someone else's.
Interesting. I seem to remember 2k being rather slow, but it might just be that I got XP when I bought a new, faster PC. Can't remember, was a while ago!
I get what you say about Linux (or something similar, at least with a bit of decent armour around the kernel). I have to somewhat disagree about MS's pedigree though - or at least point out that 'improving' upon others work isn't necessarily just an MS trait. They have done some genuinely innovative work over the years.