I'm not so sure. I don't think MS sees itself as primarily a OS company. I think it sees itself as primarily an applications company, and the Windows OS (and before that, MS-DOS) was historically the best way to get everyone to use their applications. (It was a great help, of course, to have IBM basically hand them the PC software market, not once but twice--but I think if IBM had had their s*t together and had made OS/2 solid and workable sooner, MS might never have developed Windows.) But the Windows OS itself I think has always been expendable if MS could find a way to get everyone to run MS Office applications, .NET applications, etc. (and now Azure applications) without it. This might be the way that finally happens.
> backwards compatibility? Continuity with previous sysadmin tools?
If then can make Linux run on a Windows kernel, they can also make Windows run on a Linux kernel. All they need is a compatibility layer for all the Windows APIs. And MS is certainly no stranger to compatibility layers.
How are you so sure? what if Windows has more modular/flexible kernel?
It just needs to be good enough, not the best kernel integration ever.
> continue to have a closed-source UI toolkit (e.g. Cocoa on macOS).
The comparison isn't apt. macOS can use BSD licensed programs because it's allowed to create derivative works that are closed source. Anything constituting a derivative work based on the Linux kernel has to be open source because of the GPL's virality.
So unless you think Microsoft will be willing to keep all their custom software restricted to userland (requiring basically everything else to be GPL) it seems extremely unlikely that this will happen. Microsoft is going to want to continue developing an operating system, not merely a Linux distribution.
Obviously I'd love to see it happen, but I find it extraordinarily unlikely for these and other reasons (backwards compatibility? Continuity with previous sysadmin tools?)...