I never understood why Microsoft forced Internet Explorer inside Windows. Did they fear Netscape's "API" would really threaten them ?
Yes that is exactly what they feared. Microsoft is the company that has a product for every (computer related) need. Just look at what you get in an MSDN Universal Subscription.
Those subscriptions are very popular most software development, web development and IT support shops have a universal subscription. So if some new job comes up you already have the tool to do it in the MSDN CD folder and you've already read all about it in MSDN Magazine and heard about it at Technet conferences and all the books you need to understand it are from Microsoft Press and very easy to get hold of.
But Microsoft is a Generalist company they do a bit of everything, but problem is that specialists are usually better than generalists.
Then there is open source when the software is free (gratis) and usually written by specialists and in many cases better than propriety options.
Microsoft figured that once people in the MS world started looking around for other options and finding them they would keep looking in the future. This is bad for them because it is free and easy to look for software on the internet.
So Microsoft had to keep the mindshare and stop people looking for better options elsewhere. This mean IE had to be good enough and easy to obtain.
IE 4 wasn't just good enough it was much better that Netscape 4.
So everyone kept going with Microsoft solutions.
However failure to keep this up after Microsoft's apparent victory in the first browser war brought about their demise.