If that is what's happening, then what's the endgame? Switching WSL around so that "Windows host + Linux guest" becomes "Linux host + Windows guest", i.e. Windows becomes a Linux distribution running native Windows apps in a VM with seamless integration? I'm somewhat intrigued by the possibility, but I don't see how it could work given the ubiquity of vendor-supplied device drivers targeting Windows kernel API/ABIs.
I'd expect the importance of the windows kernel for revenue growth to be increasingly less important over time. Of course they won't drop it outright; at least not right away and it's likely to stay relevant for e.g. pcs/laptops and gaming. As for games and vr content, a lot of game studios already use cross platform sdks and Linux support for games with and without emulation is pretty decent these days. Also, Android and IOS are big targets for games.
Most hardware vendors don't target windows exclusively. Some do of course but a lot of hardware works fine on other platforms even if vendors don't actively support that. Anything intended for data centers runs linux primarily. Most laptop vendors have a few linux friendly laptops at least to not lose out on the pro developer market that tends to actually buy their more expensive laptops. Likewise, most graphics card vendors want to support e.g. machine learning and that requires linux driver support.
But I get what your saying. My observation is that MS is very friendly lately with Ubuntu. I don't think Mark Shuttleworth is interesting in selling that outright but an MS distribution might be a logical next step given their increased dependency on Linux on the Desktop and in the cloud.
In the process, they are rapidly regaining developer trust by building productive relations with the same developers they were alienating under Ballmer.
It's smart. They own Github now. Most stuff that happens there is not windows centric. But increasingly the MS developer ecosystem is being untangled from windows in any case. That's necessary to future proof it.
While the windows kernel is nice and the driver ecosystem around it serves MS well, it's actually been a problem for them as well. They've failed in the phone market (repeatedly) because linux was a better fit for OEMs. Also they've had Google and Apple compete with them effectively with the ipad and chrome os in a market where MS was peddling crippled laptops. These are all examples where windows legacy was part of the problem for MS. They weren't able to compete there. Their crippled laptops were too expensive and uncrippling them would kill their high end market. So people bought ipads and chrome os laptops instead.
Increasingly desktop software that is not web based is getting more and more of a niche. Even office at this point runs well in a broswer and MS actively supports native applications on platforms of all their competitors (android, IOS, OSX, etc.). At this point that's not optional from a revenue point of view. A windows only office would be a problem at this stage. They support it and they actually do a decent job too. This too is something that happened very quickly under Nadella. A lot of the Azure revenue is in fact office revenue.
IMHO this move to support GPU virtualization and ultimately running linux desktop apps, gets them access to a lot of niche OSS applications for Linux, the entirety of the machine learning ecosystem, and the community of professionals using that. Not all of them will switch to a windows laptop of course. But some will and they tend to be the type that spends money on their tools.
Additionally, they are doing a clever play with APIs, github, cloud native stuff in Azure, development tooling etc. where they are not blocking using non MS things but merely make the choice to buy into their premium SAAS subscriptions more attractive. All of this stuff is usable without doing that but if you are using VS Code already, have your code on Github, and are doing some AI stuff in the cloud, etc; it's a small step to buy into a well integrated ecosystem provided by MS where you are using a windows laptop with their oss tools, while deploying to Azure, and maybe doing your office stuff using office 365. The value is no longer in selling the OS but up-selling SAAS and making sure the choice to buy into that is logical, easy, and natural no matter what you use.
Github codespaces is a great example of that. I bet it will be really easy to setup and come with some nice SAAS subscription. It's all OSS and you are welcome to run it on AWS or your own cloud. But I bet it will be easier to run in Azure. MS tools, MS cloud, MS as the easiest place to run linux developer tools (!!!), etc. They won't force anyone to switch. They don't care about individual developers but they do care about what their bosses sign up for in terms of SAAS services. That's where the money is.