Windows/IE Integration Offers More Benefits Than Stand-Alone Browser, says this Microsoft Presspass article from 1999. To quote::
Allchin explained that Internet Explorer is an upgrade to the operating system, not a stand-alone application such as Netscape Navigator. Whether Internet Explorer is loaded onto Windows by a consumer or by a computer manufacturer, he said, it replaces core files in the operating system that change forever the way the system functions. The result, Allchin said, is a rich set of features that allow users to move seamlessly between the Internet, intranets, and a computer's hard drive, and to combine and use information from these sources in a variety of ways."You do understand there is only one way this could happen, which is if we are replacing core operating system files," Allchin said. "There is no other way you could do this."
I think there is another way it could be done, but again - Microsoft does make a good point. There are a lot of common libraries on any operating system that make life easier for developers and users alike. Being able to share this HTML/DHTML functionality across all of their products, from IE to Project to Outlook (jokes about viruses aside, the "dashboard" functionality available with Outlook and Exchange 2000 is a pretty powerful one, and not much different than other dashboard type things found in Notes and Oracle clients, except that it's actually a little bit more open than the others, being based on HTML).
You're not going to get Microsoft to stop integrating browser technology into their operating system. It would be much better to fight the battles on Microsoft's licensing practices, past and present, that enabled them to so easily steamroll over OS/2, GEOS, and BeOS during a time when any of those alternative operating systems could have actually had a chance to compete. It would be much better to fight the battles of the API's - whether Microsoft is being open about its system, or whether it's taking advantage of special secrets to bolster IIS and SQL Server over competing solutions that don't have the same access to the core API's.
On another note is the whole notion of the media layer. Quicktime has been built into the Mac OS since the early nineties, and is considered one of the three graphics layers of Mac OS X (2D = Quartz, 3D = OpenGL, Media = Quicktime). It's a set of core technologies that many applications can be built off of. If Real, or even Microsoft, were to declare this as an unfair advantage over RealPlayer or Windows Media content, it wouldn't be too dissimilar to the IE and Windows situation. Except, there is a bit more of a perceived choice - you can download Windows Media Player to view Windows Media files. However, there is no RealPlayer for Mac OS X (native).
So, as I've said above/around, the IE+Windows versus Netscape fight is stupid. They're bickering over the wrong issues. This makes it easy for Microsoft to spin things the way they do (although, has anyone noticed how many of Microsofts arguments come off the same way a teen might treat his less-tech-savvy parents? 'Get off that computer right now!' 'I can't Mom! If I just shut it down right now, it would do ... and ... *snicker*'. There's that whole "they can't possibly know the details, we can explain this any way we want" mentality that seems to come out of many of Microsofts court statements. Once, while running the sound board at a small concert, I was told "shut it off, it's too loud". My response was "we can't just shut it off. There's lots of expensive equipment up there that might get damaged by the voltage change. I can start turning it down slowly though...". Suckers. I could have shut it down. But I didn't want to, and I had the tech-savvy know-how on my side to come up with a defense. This is what Microsoft seems to do in court, and it has gotten them in trouble with the judge before. There is some merit in some of their arguments, but they add this extra layer of whine and bullshit on top of it all, like "if you take apart windows, we'll be blasted back to the days of the Altair!". Bullshit.)