I believe MS knew full well what they were doing when they released Vista. They knew to improve security they would have to completely re-vamp the OS as people understood it. They knew that there would be problems. But they had no choice.
That's why they've done it in installments, to lessen the impact.
I believe they knew that Vista would be the first installment of "Windows 7", heck they were talking about "Windows 7" not long after they released Vista.
Just my two cents!