It would just be another way to run Windows applications...a "free" way, as opposed to the most recent way. Yet even with a "free" OS, users would still have to pay to buy those MS applications.
But why would they? If they were willing to do that, they'd be running Windows in the first place. They're running Linux either because it's free or because they think it's better. In neither case will they want to pay for direct ports of Windows apps, especially not Microsoft ones.
Why would they?! LEt me give you an example: TiVo.
TiVo runs on Linux. Linux has no games worthy of note.
But if either of two things happened: 1. that Windows functionality was incorporated into Linux, or 2. That Windows was installed onto TiVo boxes, then TiVo users would be able to download and play X-Box games, for a fee...without buying an X-Box or a game (just renting a game now and again).
In contrast, right now the developers of proprietary stand-alone hardware devices have very little choice about which free OS to load onto their boxes...which screws everyone because they can't sell MicroSoft downloads to the current crop of free OS's. That's why TiVo has stalled...no games. No MS Word. No MS Excel. No Outlook. No LiveOffice Meetings.
All of that changes, however, if there is a "free" Windows OS out there. Suddenly TiVo can do more, and charge more, and be a better bargain (you don't need a separate home PC or X-Box or PlayStation or DVR or VCR or even a stereo receiver for your music).
All of those home DVR's, all of those Treo email phones, all of those standalone hardware devices could offer more and charge more and be more popular if they could let their users choose to download MS games and applications.
You're talking about a vast new OS marketplace that hasn't yet been tapped by the gaming and application industries.
Linux is free, but has no games and few worthy applications. Windows is pricey, but has all of the best games and applications. Thus, the current situation forces hardware vendors into making bad choices that keep the marketshare of *both* Linux and Windows down.