And the moment there is any disruption ripping CDs and playing MP3s the users will raise hell and Apple will put out ads saying simply "On a Mac it's rip, mix, burn baby!" You underestimate how much college students would be righteously pissed off at Microsoft. No patch would ever fix the PR crisis that would create for Microsoft among <30 year olds especially in the 13-25yr old range. You seem to forget that most people in this age group think that the RIAA (or for those who don't know about the RIAA, it's member labels) is the Great Satan. They know Microsoft has more cash than every government in Africa combined and that it can tell the record industry to go f@#$ itself without any problems. If Microsoft is serious about Palladium, it will tip its hand and show consumers that is is in league with the record labels when it doesn't have to be. That would be the ultimate selling out for many people and it would be Microsoft's waterloo.
As for Winamp, who cares? Most people use Windows Media Player for just about everything because it plays just about anything.
Virtually no one I've met uses WMP over Winamp. Literally all but 2 people I've met on campus use Winamp if they use Windows or they use iTunes if they use MacOS. WMP is not a mp3 player as far as most users are concerned at my school, it's just a movie player. And yes, they know it can play MP3s, it's just that they think it sucks ass compared to winamp which is small, totally unintrusive, doesn't spy on you, never ever bogs your system down and aims to do just one thing well. WMP is a great movie player, it just sucks compared to Winamp for music.