This is something that I've been thinking about since I started hearing about Windows 7 and the closer ties to the Windows Live Services. Basically my concern is based on the EU's investigations into Internet Explorer being built into the Windows platform. For the web to really become an integral part of our desktop there has to be easy and seamless access to the Services we want to use. This is going to mean that the Web Browser will become less of a stand alone application and I would expect it to tie in even deeper to the OS. Under the EU antitrust investigations Microsoft's move to tie Internet Explorer into Windows is unfair and is exploiting their monopoly. The limitation this is going to force on Microsoft and Windows 7 can only limit the innovation that would otherwise be possible if Windows and Internet Explorer were allowed to fully merge.
Windows being able to login in an Online mode where the browser is automatically running as a service, logging you into your favourite sites and treating certain sites as applications on the Desktop. Feeds in the sidebar that show which contacts are online, what they're doing, what they've changed or added to their profiles and any messages you've received through email, social sites or sites such as Twitter. The OS would then automatically connect to SkyDrive, or any other online storage, and map it as one of your Windows Explorer drives making your documents easily accessible. Integration with Live Mesh would allow the system to automatically sync with your other devices and PC's. The built in search would cover all of your social services as well as the net and your file system. The browser would remain but would be used for web browsing and bringing more information to your desktop like web slices which make parts of the page available. The merging of Windows and Internet Explorer would be beneficial to the users which is supposed to be what the EU is all about. If Firefox wants to complete then it must be able to tie into the OS in a similar manner. This is the challenge Microsoft and Mozilla need to try to meet and at this time I can see the EU restrictions limiting innovation on the Web front.