Wordperfect is still quite popular in the legal/judicial sector. Other than that, I'm not sure who's still using it.
I could see something similar to this working well when a subscriber's ISP hosts the actual OS instances. There are a lot of benefits to having professional administrators in charge of systems, something extremely rare for home users. Given adequate throughput and low latency to the data center, less computer savvy people could connect to these managed instances, which are provided by their ISP. They wouldn't have to know about or care about updates, virus scanning, or even backups for their data. ISPs would (potentially) have much lower rates of help desk calls.
Uh, no. What the hell kind of system are you running that you have no man page for seteuid? I just ran that on my fedora 8 system and a FreeBSD 6.3 box and both produced the documentation. In any event, seteuid is part of the standard C library. It allow you to set the effective user ID for the current process.