addendum: I think it's telling that XP would have been designed and in production by the time that Gates handed the reins to Ballmer, but then directly after that there was a big gap until Vista, which was a flop. During this time the Windows Mobile side of things also languished, and may or even may not be only just now getting back on track.
I think the last 10 years have probably been a huge learning experience/adjustment period for Ballmer and MS in general, but 7 is alright and WM7 looks to be at least a step in the right direction. Pity for them that Apple has used their relative impotence during the time to steal a march on them.