Facts not in dispute, except by liars and assholes:
- OLPC has from the beginning shared specifications and test machines with Microsoft.
- Microsoft is and has been working on a version of XP for the XO.
- Dual booting is not a technical problem, at all.
What we are looking at is wrangling around licensing. The flip side of not understanding software freedom is not understanding software unfreedom. In all probability, Microsoft will be willing to give Windows licenses to countries in the developing world to run their software on student XO's at very little or no cost. The question is, under what terms will those licenses be given, and there is no real limit to what Microsoft could ask for. For example, they could, and it is looking like they will, demand that the XO's running Windows will not dual boot Linux. That is, they could make that a condition of the low-cost license. Whatever licensing deal Microsoft offers, it won't be a deal with OLPC, but with the purchasing country. OLPC's leverage here is somewhat limited.
Most people who blog about OLPC seem to start and end with the assumption that Negroponte is essentially out of control, just a raving, egomaniacal liar. Virtually insane. Let's assume, just for the sake of argument, that he's a rational, informed actor. Why would he have said that Microsoft would allow dual-booting if he knew, in fact, that they have no intention of doing so? Perhaps to get their position on the record, to force them to publicly refute that assertion.
An XO that dual boots Linux (Sugar) or Windows is exactly as much of a threat to OLPC as dual booting Macs has been to Apple. That is, no threat at all. In the long run, Windows can't win on the XO, because OLPC's Linux distribution will keep getting better, and Microsoft cannot continue to improve XP, won't be able to run Vista on the XO, and they can't continue to support XP into the Vista+1 era. They can probably support two versions of Windows, but not three indefinitely. Dual booting would sell more XO's, as it has sold more Macs, and it will ultimately produce more devoted Sugar/Linux users, as it has created more Mac users. Just remember that the difference between the two scenarios is that Windows makes a healthy profit off each boxed copy of Windows it sells to Mac users. If they're giving away Windows on the XO, it is a different equation.
On the other hand, if Microsoft could force countries to make a choice between Sugar as it works today and Windows, that's a tougher one. Sugar isn't really done today. But it is not a killer as long as the countries have the option of switching down the road, and that is exactly where Krstić draws the line in his post:
We’re jointly making it possible to install XP on an arbitrary XO — subject to the constraints of the Bitfrost theft deterrence system — and then convert the machine back to Linux easily. I have made it clear that the XP port will not receive my security signoff without this Linux rollback feature, and have no reason to believe it won’t be implemented.
This is OLPC's fallback position, although I'm not sure how potent a weapon the "security signoff" is. By my reading, their more aggressive maneuver is to make countries aware ahead of time the terms that Microsoft may impose on them, to get them thinking well in advance of the dealmaking.