A theory that I didn't notice as I scanned the comments was that Microsoft will NOT try to develop MS Linux, per se, but will rather try to develop a Microsoft GUI for Linux.
Microsoft will compete with KDE, GNOME and GNUStep by offering Office only for THEIR Linux GUI. They can make their GUI available for $0, (though NOT open source), maybe set it up to run DirectX applications (it is embrace and extend after all!), and make everybody who wants to run Office on Linux use the proprietary MS Linux GUI.
By supporting a standard, then providing proprietary modifications to the standard, you can become the de facto standards body.
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Microsoft will compete with KDE, GNOME and GNUStep by offering Office only for THEIR Linux GUI. They can make their GUI available for $0, (though NOT open source), maybe set it up to run DirectX applications (it is embrace and extend after all!), and make everybody who wants to run Office on Linux use the proprietary MS Linux GUI.
By supporting a standard, then providing proprietary modifications to the standard, you can become the de facto standards body.
-Dan