Microsoft Windows 7 Starter for Netbooks to only allow 3 concurrent applications?

The Wall St. Journal had this one today:

Microsoft Corp. is taking an unusual approach with its new Windows 7 operating system: Customers buying many of the least-expensive laptops[netbooks] with the software are likely to be limited to running three applications at a time and miss out on other key features, or pay for an upgrade.

Holy Fail-Whale Batman!  Netbooks are the hottest item today in the Windows world, accounting for any and all growth in the PC sector.  By and large, they run Windows XP (which is actually not bad after using Vista for a few minutes).  According to the WSJ, Microsoft is only making $15 off of each copy of XP being put on those Netbooks.  This is largely because very capable, free Linux distributions are "good enough" and consumers are only willing to pay a few extra bucks for the Windows they are used to.  Windows only commands a $15 premium over free software on low end PCs.

Netbooks — compact laptops that can cost less than $300 — pose problems for Microsoft because it can’t charge computer makers as much for software used on the low-end systems as for standard desktops and laptops. The financial effects were felt in the quarter ended in December, when it contributed to an 8% decline in Windows revenue. Investors will be searching Microsoft’s quarterly financial results this Thursday for further signs of netbooks’ impact.

So, Microsoft will be screwed when they try to release Windows 7 on Netbooks.  If they charge anything more than $20, huge swaths of customers migrate to Linux.  If they charge less, they lose all kinds of revenue.  What can they do?  They are going to try to entice their customers to upgrade?

Microsoft is only letting its customers use three applications at a time and is using its patented "crippled by design" features to limit other areas of the operating system?  This isn’t going to fly well in our collective opinions.  Hell, we’ll take the seven year old Windows XP and be happy.

Here’s the scenario: You are working on three applications (Say Outlook, Word and Internet Explorer), but you want to edit something in Excel.  You try to open it and that paper clip thing comes up to tell you that you need to purchase an upgrade to unlock Windows for this functionality.  You proceed to throw the computer out the window?

What if you just want to open the calculator?!  Or an image viewer?  RSS reader?  Or an IM Client?  Or your Skype is ringing? 

Even if you do only need three applications most of the time, the mental anguish when trying to open that fourth in an emergancy or just even knowing in the back of your head that three is the limit is going to be painful for the Microsoft camp.  This isn’t going to be good.