It is not that Microsoft can't shrink the size of Windows. In fact that is exactly what they did with Windows RT. The problem is on the Surface Pro product they are including compatibility with full Win32 and have to supply all the extra cruft that entails. So people want to run all the native apps like Photoshop, but then complain when it takes too much space :P

Windows RT supports Win32, you just can't execute any non-whitelisted binary. Windows RT has Notepad, Calculator, Explorer. All Win32 apps.

To my knowledge Windows RT is only 32 bit at this time. The system utilities like explorer, calculator, paint, etc on 64 bit systems are 64 bit applications.

AFAIK WinRT isn't windows. It's a Metro-Style ARM OS with Windows Branding.

That's not an entirely fair description. Windows RT is a real Windows 8 installation, but running on ARM, and restricted to running only executables signed by Microsoft.

Windows RT is built from the same source code as Windows 8 and virtually all Windows 8 features are there.

Well, how do you define "Windows"? Windows RT (not WinRT!) is ARM based Windows that can only run "Metro-Style" apps. With the exception of Office that comes preinstalled on Surface RT. It still has some familiar features like the desktop, command prompt, Explorer, like normal Windows OS but you can't install any desktop software.

So it's like using Windows without the benefit of the solitary advantage of actually using Windows.

Windows RT is not a shrunken version of Windows as we used to know it. It's a new OS, created to run on ARM, the only similarity to previous Windows versions being it's name.

Shrinking Windows means finding a way of reducing or removing the "cruft" you mention.

EDIT: It appears my initial sources were incorrect. Feel free to downvote me, I should have checked a few more places before writing my post.

Windows RT is a ARM build of the Windows operating system as we know it. It even has the familiar desktop but it is closed to run only Microsoft Office (on Surface RT tablet). Users may only install "Metro-style" apps. It is shrunken to include only those components of Windows that Office requires. But one can still start the familiar Command Prompt, Windows (File) Explorer etc. It's very much the familiar Windows we all know.