By this logic, no one would be able to serve banner ads on top of copywritten content.

Plenty of existing and historical malware browsers and plugins have injected ads.

Furthermore, because it's a full page width banner, it's not entirely clear whether Edge is rending something next to Google's page (i.e. in MS' browser) or in Google's page (i.e. commingled with their content).

I think your logic is flawed. Banner ads are explicitly permitted by the web site operator (they get paid for them after all). Plugins aren't permitted by the web site operator, however they are permitted by the user, who has to explicitly approve installation of the plugin. Same with malware browsers: the users chose those. Of course, the users were ignorant and clicked on something they shouldn't have, but still it's ultimately their own fault: they opted in.

It's different with Microsoft: MS never asked for users' permission to change content, nor did users ever expect it.

How do you get from 'users opted into malware browsers/plugins' to 'users didn't opt-in to Edge/Windows'?

Edge comes with Windows, and users pick Windows because it's the default choice and basically a monopoly for PC operating systems.

I don't think a browser render counts as creating potentially infringing content. I'm at a loss to explain why but I think it's the ephemerality of a browser render and the lack of a distribution method. Where are you getting the idea that infringement is possible at all by the browser itself, regardless of fair use laws?