Great post here by Jon Galloway.  While I kind of knew this instinctively, I have also caught myself on more than one occasion saying "wtf why doesn't Microsoft just ship Paint.NET or Notepad2 or ... .... ... ?"

It makes a lot of sense when you really give it some thought. 

On the other hand, I think MS has done a great job in the last couple of years with getting in touch with their community, getting involved in open source in a way that makes sense for them.

I think the best they can do is identify really good software out there, and acquire the guy who did it, like they did with SysInternals.  That's not really possible with open source stuff with many contributors, for reasons Jon pointed out, but it's something.

In the meantime, the rest of us can do our part and use/contribute to OSS projects, and use them to replace the not-so-great Microsoft-grown apps on our own.