Am I missing something here? The custom linux kernel part isn't interesting at all - in fact, Microsoft has pretty much admitted they can't scale down Windows. What's interesting to me here is Microsoft is building an IoT solution that allows manufacturers to delegate security to Microsoft instead of having to roll their own.
This is not about Windows technical capability - which is effectively every bit as good as Linux in this space. This is about, "OK, developers, you'd rather have Linux than Windows on your IoT device? Cool. Now get connected to Azure for that IoT data, we'll help you keep that device secure and up-to-date." It's about market share for Azure.