I have been working on the software described in the CNET article for about 2 and a half years...not far back enough. It's got an HTML equivalent of the start menu, task bar, system tray, title bar, close program button, add/remove programs, etc. If you'd like to see it please e-mail me at jsante@XXXiusb.edu minus the Xs.
As of now it works over the internet, but when bundled properly (and I was planning on doing this), it can be used to do exactly what MS described. Incidentally, if anyone would like to help me out developing it, I am just now aquiring help.