Because of an "unforeseen code relationship", they say. What more could we want to know?

It sounds like some other piece of MS software is relying on .NET not performing the checks that it should have been performing.

Is Microsoft allowed to make arbitrary business decisions that prevent it from responding to security vulnerabilities or is backwards compatibility given a special pass?

They own an operating system. We get to hold them responsible for whatever choices they make that impact security.

Windows attempt to always remain backwards compatible has left a huge tangled mess of dependencies. I applaud Microsoft's attempts at this but a slow cycle of breaking changes would allow a much better long-term system. Of course, that also means you have to be committed to some sort of long-term roadmap (something that appeared to be lacking between XP and Longhorn/Vista/7).

The last time they did that was with the launch of vista. People were not pleased.