You hit what I think is a critical point but with some anti-Microsoft bias.
My view is that Microsoft itself simplified the PC experience quite well for a set of users during the 80s and early 90s. With DOS and Windows 3.11.
During this time, a lot of people who were not "computer experts" at that time were able get things done with the computer. Even if it was "painful" to do something (all those commands in the command prompt), people would do it beacuse they will achieve some result.
Then the Monopoly became evident, and around the time of Windows 95 Microsoft realized they did not need to make things simple to users, but instead users had to learn how to use their tools. This is what you get right; Microsoft did not need to do anything between Windows 95 and Windows XP to get money. People needed to use Microsoft products because other people used them and if you dared to use Qpro, Apple products or anything else, then your workflow was not compatible with the general workflow of everybody else.
This is were Apple (I guess, Steve Jobs) got it right. They looked all the "paper cuts" [c.f. Canonical] that people thought were "normal" (remember the "normal" BSOD?) and focused on doing products where people did not have to go through all those issues. More importantly, they learnt how to do that. How to detect those "paper cuts" and how to fix them.
In the 20 years that Microsoft monopoly served them, they lost the ability to do that. They lost the ability to know how to make things easier for the users; I suppose all that got mixed within the convoluted bureaucracy within the company. You actually can see some of that in the way Bill's mail is treated: The concerned people do not "get it", what is wrong with Bill's scenario; they just open a "ticket" to fix the Media player problem... and surely a download of Media Player appeared on Microsoft's front webpage next Monday. But they did not attack the underlying problem.
I agree with you that with Windows 7 Microsoft is doing better. But as you, I also think that they still have not "got" the talent they lost a long time ago of being able to make things easier.
I always thought that it would have been better (from the point of view of technology progress) if Microsoft had split in the 3 sub-companies when they were sued back in the day. That might have helped to streamline the bureaucratic processes within the company.