I've just finished to read one of the (many) delirious on the net against IE7, the article by John Dvorak called "The Great Microsoft Blunder".
Why someone can think that improve Internet Explorer's functionalities could be a time loss? Why someone can say that "all the work that has to go into keeping the browser afloat is time that could have been better spent on making Vista work as first advertised"?. 
First, I think that Microsoft can't go out of the browser's world. I agree that today there are browsers (like Firefox for example, my favourite) that are better than IE on many aspects, but IE is an important piece on the Microsoft's world and must exists and live. Don't forget that IE is always the most widespread browser so... the decision to not upgrade the most widespread browser is a stupidity I think.
Second, I can't see the link between IE7 and Vista. The time spent on improve IE7 is not time stolen to the Vista's development. There are different teams that works on these different side and all these teams have the right energy to make a great work. Making the consideration above is only speculation I think.
John, you've all my respect but permit me to say that your considerations here are not so right...