The Android NDK is reliant on this - any application in Android can perform your arbitrary code execution, and it seems to be working out alright.
The Android thing works because you aren't just running arbitrary code, you are probably running code that you got from the Android Marketplace, which was probably screened to make sure it doesn't do something bad.
Also if you use sudo or su in X, they now have root thanks to the keylogger.
Security is hard.
The only problem is people refusing to upgrade from a decade old OS.
Also, we have several applications which, while they will run on Windows 7, they simply do not run well. From a business standpoint, it's really hard to justify an upgrade that results in reduced functionality in the name of security. I can clean up after malware pretty quickly - people working with outdated but business-critical applications lose hours of their days when software starts acting up because it wasn't written with a good security model in mind and it's being forced into that environment.
You can say Windows 7 solved the problem all you want, but there remain countless areas where Windows XP is required, and virtualization is not a magic bullet - networking is always tricky. And in any case, we do all that work of migration and what do we gain? Exactly what we have right now, except with hardware accelerated graphics that don't support all our hardware and some difficult to quantify reduction in malware attacks.
I'm not one of them, but I see them every day. Windows 7 does not solve the Windows XP problem. (The Windows XP problem will be solved when any given computer can run Windows 7 easily.)
Imagine how much trouble could have been avoided if MS had used that model in the first place...!