Here is how I see the whole situation:
First, Micro$oft was hoping that everyone would just throw away XP when Vista came around as if everyone who owns a PC has as much money laying around as they do. That doesn't happen, and to their surprise, even though some people are buying new PC's with Vista, others are still choosing to buy XP over the new OS.
Next, they say that they are going to stop selling XP altogether. What better way to remedy the weak Vista sales than to take the competing software off of the market, right? Well, not quite. What they created was a flood of people attempting to buy up as many of the remaining copies of XP while they still could to keep from having to use Vista if and when a new PC is purchased.
So, then in attempting to capitalize on the flood of extra money being made, M$ extends things for XP a little further, certain that once the extension has run down along with the hype and more Vista PC's have been sold that surely now they can eliminate XP and everyone will be eager to buy Vista. Meanwhile they are pressing a little harder to get Windows 7 finished.
M$ then learns that, as the time is running out on the extension, three things have been happening: people are either still sticking with XP, are switching over to non-Windows OS's, or are buying a PC with Vista installed (possibly not knowing what other choice that they have) and then downgrading to XP. Sure the last option means a PC with Vista is sold, but that means nothing once it has been downgraded.
So now, they are extending things again. Why? It's their only choice if they want to keep customers.
Through this timeline, what I see is Micro$oft's first real crunch since the beginning where they are having to do what the customer wants instead of doing whatever they want thinking that the customer will just fall in line and kiss their feet. I personally blame this change in the customer on the Internet. It has made so much more information and software easily accessible to the layman that without it 99% of people wouldn't have any knowledge about and would simply be continuing to fall in line to accept whatever product M$ chooses to throw at them because the people think that they don't have any other choice.
YAY INTERNET!
