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You talk about the relative failure of Java and attribute that failure to Java being a closed system for so long. But Java applications also tend to look just plain terrible, even worse than most web apps, and I think that is the primary reason we don’t see many java applets these days. The problem isn’t open/standard-vs-proprietary, it’s correct technology versus wrong technology.
Could it be that the web-app standards are just the wrong technology for making rich, pleasant, compelling applications?
all that i'm saying here is that there are many virtuous effects of an open, non-proprietary ecosystem, and that Microsoft could have used it's huge tooling advantage to build a platform that will benefit from everyone in the world working on it. it would be asymmetric to what Adobe could do with Flash (without opening it), instead of strength-on-strength.
i don't buy all your arguments in the "side-by-side experiment" post -- i think that at a root level, it's all just software, and there's nothing that's inherent in HTML & CSS that precludes a compelling user experience.
i will say, also, that the way something looks is quite different from how usable & useful it is, and i think that it's manifestly obvious right now that the utility of web apps is growing by leaps & bounds every single day, irrespective of how they look.
anyway, we'll see. my only point here that i was really making is that Microsoft had the opportunity to side with the open web against Flash and take advantage of their tooling superiority, but missed the chance, possibly because they line up with your line of reasoning here. completely reasonable; we'll see what happens.