The Core i7's are consumer-grade processors and are slower than the Xeon's the Mac Pros use
This is completely incorrect. The current Mac Pros use Nehalem based Xeons which are two generations back from the current Ivy Bridge i7s. Xeons may have differences in core count, cache and/or ECC support but their execution units are the same as their desktop equivalents. The base Mac Pro CPU is equivalent to an i7-960 with ECC support. The current Ivy Bridge i7s are a fair bit faster.
All other operation systems running on similar hardware but having strict security and privileges proof you wrong. Even Linux existed at that time already and ran happily on that hardware.
No, he is completely correct. Linux of the time did not "run happily" on that hardware with the same level of GUI complexity as Win9x. Either Linux had no GUI at all, or a simple window manager like TWM or FVWM.
This is also doubly wrong in claiming that all other operating systems at the time had proper security. The biggest competitors to MS at the time were even simpler and less secure OSes. For GUIs there was MacOS which didn't have protected memory and could barely multitask, along with having no security model. On the server side the biggest at the time would have been Novell, which did have a security model, but still had no protected memory and much simpler multitasking than even Win9x.
"Ninety percent of baseball is half mental." -- Yogi Berra