I'm not sure why you think it's necessary to dismiss the accomplishments of Google and Apple while at the same time being condescending toward the people who use their products. For example, to say "Google is popular because people like Michael Arrington, Walleywag, and those biased non-professional bloggers-turned-online-reporters sing praises toward Google" is to imply that Google's products are basically worthless and the people who use them are too foolish to realize it because they've been duped into using them by a cadre of clever bloggers. This doesn't logically support your argument that Microsoft isn't dead, so why say it?
If you want to show how pg is wrong, I suggest starting by rebutting his arguments, not putting down most of the people who enjoy this site.
Google's way is to play with dozens of ideas in the hope that somewhere around 10% of them succeed to cover their growth, sort of like an in-house venture capital. In that respect they're doing remarkably well.
If such blunt and sweeping statements are being made in Redmond then surely Paul Graham is right. Microsoft is dead.
To even think that IPTV and YouTube are 1 on 1 competitors represents a fundamental misunderstanding of what YouTube is all about.
However, despite my confidence in XBOX, Microsoft is still going to experience a lot of bleeding because XBOX at its best isn't enough to cover for the fact that the Desktop and Windows OS are becoming irrelevant.
Google is popular because people like Michael Arrington, Walleywag, and those biased non-professional bloggers-turned-online-reporters sing praises toward Google. How many Google apps dying? How many Google apps that people use these days? AdSense, GMail, GMap, and of course, their search engine.
I think you read online hi-tech newspaper or surf reddit.com too much where of course the content is full of new startup that does pretty much nothing astonishing.. "Scribd, the YouTube of document..." or.. the X-programming language and how X is cool but C# isn't.
Apple is sort of the "new trend" these days because it looks good. Most of the computer science students in my university now are switching to Apple of course because they saw the cool/smart kids are using it.. for browsing reddit.com and talk how cool ruby on rails and DHH are.
I bought Apple 2 weeks ago and by the 3rd day, I installed Parallel Desktop with Windows XP loaded with MS Office and Visual (C# and Web Developer) Express Studio 2005. By the way, I'm a long time FreeBSD users and I have a machine with XP dual boot + Ubuntu (now Ubuntu on the other hand is one piece of distribution... respect..!)
Microsoft is not dead. They're still up and running. They're just not visible in your path Paul. They're doing other things that do not interfere with your Web 2.0 posse. One IPTV company gave a talk in my e-Business course a month ago, she sang praise for Microsoft because they have the most complete strategy in IPTV world. FYI, IPTV is better than YouTube.
Let's admit it, people need to hear new information, new gossips, new products and new toys. But only time will tell if these new stuffs can replace Microsoft.
The other thing is, if Desktop is dead, why am I keep hearing news about Slingshots, Apollo and WPF/E ?
Maybe Microsoft knows how broken the WWW is and they prefer not to build their interest around it (other than just to be another big player next to Yahoo! and Google because they have pride and they want to be acknowledged that they still can be a big player in any field..)
MS isn't dead yet, not until they stop creating software/hardware and move to the business/consulting field. It's true that they lost the "touch" and that they lost in understanding their customer, but they're not as bad as you envisioned.
Of course you're writing this essay to fire up these hotshots or web 2.0 wannabes to quit their jobs and to forget applying for big companies and make a web2.0 thing for YCombinator (^_^)