Don't you just hate it when Microsoft takes the high road on security and raises some valid points. We've been through this scenario a bunch of times where some class of programs that used to only be used by local programs became accessible on the web and suddenly there is a rash of exploits (jpeg and pdf come to mind), I'd rather not go through it again.
That said, I think Microsoft laid out the problems with enough specificity that they could be addressed.
In the linked case, the short story wasn't renewed, but the longer compilation (with a different title) was. Since the compilation was copyrighted within 2 years of the short story, its renewal extended the copyright of the short story as well, so the first half isn't in the public domain, neither is the short story.
Copyright is complex, PG made an error, admitted it, and pulled the story.
I've looked at the listing, and it's right! -- Joel Halpern