The fact that OEMs and users resort to Windows XP instead of Vista as their operating system of choice for netbooks (if they don't choose Linux, that is) is seen as a major loss of face for Microsoft. Many consider this to be an issue of performance - netbooks simply can't handle Vista in terms of processing power, video power, and RAM. Sinofsky disagrees with this, and presents a different culprit: the solid state drives were too small to house Vista.
And it's not the RAM either, he continues, as he bought the model used to demonstrate Windows 7 with only 512MB of RAM, and upgraded it to 1.5GB for USD 19. Netbooks today are all DirectX 9 capable, so Aero Glass works just fine. Sinofsky also explained that Windows 7 will allow you to remove more components post-installation, so that you can save diskspace.
The fact that he was showing Windows 7 running on a netbook further disproves the claims that these netbooks (which we all love because they're cute and cuddly) can't run the most recent version of Windows. As long as you don't use the default, cheap SSD, Windows Vista will do just fine. Small write operations are the real performance killers on these smaller, cheaper SSDs (the SSD can't keep up with the OS), and this problem affects all operating systems that I've tried on my Aspire One before it underwent its HDD surgery. The default Linpus installation, Ubuntu, Windows XP - they all experienced major cases of SSD lag.
If you're buying a netbook, avoid the SSD models. They might be cheaper, but you are going to get extremely frustrated with the SSD.