One thing that worries me a bit is the 0.8 second delay when you switch screens. This may make the phone feel slow, and if it slows down over time, then that can kill the phone. But I can't know this now, one just has to take a risk.
I don't know the numbers of "tainted" Win Mo consumers but I'm not convinced they will really appreciate the differences between their old "piece of shit" WinMo and the new shiny (and hopefully freaking awesome) WinMo 7.
I think Microsoft may stand an outside chance; they are already going in the right direction with recent UI/UX changes in Windows. They've always got that it should be slick but usable; their major problems (in the past) have been in realizing that slick on a desktop != slick on a phone...
In order for Windows Phone 7 to succeed where Windows Mobile failed, they need to revamp the internals of the OS just as drastically as they have revamped their UI. It's definitely possible that they have done it; clearly Microsoft cares a lot about this release and clearly some major parts of the underlying OS are changing. But I personally would not bet months of development time on it until someone outside MS gets the chance to use the phones in a non-demo environment.
Android at least is already gathering momentum, despite all its issues. It's nice that Microsoft cares, but you won't get rich selling to the 3 people who decided to buy a Microsoft phone.
You say "They care about how polished the outside looks, how thin it is, and how smooth and fast the user interface is."
People also care about how easy it is to do whatever they're trying to do. And this combination, smooth, fast, and easy, is really hard to achieve. I'm not entirely convinced Microsoft is still up to it, though I'll be glad to be surprised.