IE7 Now Doesn’t Require WGA
In the name of security (I say it is to up their market share for the browser) Microsoft has removed the requirement that you run Windows Genuine Advantage (WGA) validation prior to installation on Windows XP machines.
Microsoft takes its commitment to help protect the entire Windows ecosystem seriously, and we’re taking a step to help make consumers safer online. We feel the security enhancements to Internet Explorer 7 are significant enough that it should be available as broadly as possible, and this means making it available to all users of IE 7-compatible Windows operating systems
Translation, now illegitimate or pirated copies of Windows XP can now upgrade their browser.


Not that I would ever say pirating is okay…. …but, I think it is great that a company would realize “people are using our products illegally, and may pose a threat to the legal users if we don’t give them certain security patches or upgrades”. Companies sometimes need to bite the bullet, just like in this case, but it’s for the common good.
I think you’re giving MS too much credit (although I could just be pessimistic). It seems more likely to me that they realized they would loose a large chunk of the market by forcing users to the competition (i.e. Firefox).
I think they have bigger things to worry about
http://www.wired.com/politics/security/commentary/securitymatters/2007/10/securitymatters_1004
Interesting hypothesis, but I can’t imagine how it really relates to the new IE though? (unless MS knows something others don’t)