I think LH refers to what appeared later as Windows Vista. It's kind of nice to see a Microsoft executive had the same opinion of this product as their customers.
Longhorn was planned to be a dramatic follow-up version of Windows XP in which the Windows shell was rewritten on top of .NET with three main pillars: communication (WCF), presentation (WPF), and data (WinFS). WinFS was a new filesystem based on a relational database engine (SQL Server).
Longhorn was similar to a previous failed Windows release (Cairo). Longhorn was built on .NET whereas Cairo was built on COM. Longhorn used a new filesystem based on SQL whereas Cairo had a new object-oriented file store. Longhorn use Avalon for the shell with concepts for people/contacts whereas the Cairo used Outlook. Before it became an Office application, Outlook started life as the new Cairo shell in which emails, calendars, task were integrated into explorer. You could do advanced grouping, tagging, and filtering on files. In fact, the first version of Outlook, Outlook 97, as an Office application allowed you to view the file system just like emails.
Longhorn was several years late before the Windows release was canceled with no clear end date in sight.
A reset was directed to produced an incremental new release of Windows called Windows Vista. It would be purely native and ship in a year and a half.
The .NET dependency "Bet on .NET" was jettisoned, and all Window's dependencies needed to be fully released rather than works in progressed. WCF, WPF were released independently. WinFS was killed because it was too slow.