One thing he doesn't mention is how vista also essentially kills the low end desktop market as well.
Right now you can get a PC with about a 2ghz process, 512-1gig ram and dvd burner with a monitor from dell (or whoever) for like $400. With xp this is going to be a pretty speedy little machine. Its not going to break any records but its going to get what you need done besides video/gaming. If you put vista on that machine its going to be considered slow.
By keeping around xp it would also free up MS to finally do what they have been needing to do from the beginning. A complete OS rewrite. That way they could do what mac did with osx. Start over and come back with a killer OS. They wouldn't have to bother with compatibility because the Windows Basic(as he called it) would fill in the needs of those people and then eventually the new OS would take over. Essentially what they failed to do with vista.