Today Microsoft agreed to change MS Vista to accomodate other desktop search engine's like Google's Desktop Search. Microsoft's version will remain but will allow the user to have another search engine there. They will also publish info on how to improve performance.
It's interesting how Google is exerting it's power to influence the DOJ to move so quickly to force this change. At a $160 bil market cap and through smart lobbying, Google has emerged in Washington as a force to be reckoned with.
If only they spent their effort improving the rudimentery Desktop Search. Try using it. It does not have the features of the search engine like concept based search or even spelling correction. You have to have an exact match for it to turn up any results. If you move a file in Outlook, the Index is not updated. It is cool that it looks at web based Gmail in addition to your desktop, but it still does not designate if a file is attached to a result - a major way of differentiating hundreds of similar sounding files. There are no filtering mechanisms. If you are using the tool for email search, you are better off carbon copying all your mail to Gmail and then using it exclusively.
While I have not tried Vista based search, I'm hopeful that Microsoft has taken advantage of this. The technology to do this well is over 10 years old. We at AltaVista did a better desktop search than Google has today. The problem is that we did not promote it like we could have with a pay the supplier sort of model.
In any case, this is definitely a way that Microsoft could slow and maybe turnaround its decline in search market share. I'm sure that Google will not sit back forever and wait.