Having browsers mean X apps that run other apps, not 1. I think it is sort of a dystopian vision to have the OS be the only party responsible for rendering apps. Having IE, Safari, Firefox & Chrome (and Flock, MobileSafari, Opera, ...) in the mix has really spurred a lot of innovation and there's no reason why the innovation will slow down.
> The OS would just run web apps directly
You know, that's basically what Microsoft tried to do with internet explorer, but they ran up against such vehement opposition I'm pretty convinced that's why the concept hasn't progressed.
Next up is Google with Chrome/OS/Android, will they be perceived as Evil also? Only time will tell.
See http://shoptalkapp.com/blog/2009/10/15/the-real-web-os