Hmm,

I feel much better about NSA involvement with Linux because of it's open source nature.

The NSA could be working to patch security holes in Windows or it could be installing back doors or both. With Linux, it's clear they're patching security holes/vulnerabilities.

There's also the small matter of whether they should be using tax payers dollars to fund the development of a proprietary product. I realise that most people use Windows but it still leaves a bad taste in my mouth. And I'm not even American!

I get where you're coming from, but let me play devil's advocate. The NSA has a possibly unique position of being able to protect the United States' information infrastructure from emerging threats, on account of their well funded, top-secret research in this field.

Now for better or for worse, Microsoft Windows plays a major role in US business infrastructure. So isn't it a good thing for the NSA to use its position to strengthen the USA against new attacks that, perhaps, only this agency has the ability to see coming?

Aren't Microsoft tax payers themselves?

Probably not. I would be surprised if their accounting department has not found ways to completely offset all of their tax liabilities.

I know they don't pay state tax: http://crosscut.com/2008/02/02/microsoft/11167/