Putting Windows XP on the OLPC is a terrific idea.
My kiddo has had her little OLPC XO laptop since February. And it's an awesome little piece of hardware. It's got a great screen with a high-contrast-ebook-mode that looks great and a built-in video camera and it swivels to work as an ebook reader and it has stereo sound and it's got no rotating storage and a spill-resistant keyboard and it's just an ideal little laptop for a kid who wants a computer.
That is to say that it'd be an ideal kids' laptop if the software wasn't such an absolute lemon. It's running somesuch linux kernel with a nonstandard UI called "Sugar" that seems to inspired by DeskMate (and this is speaking as a former member of the DeskMate team). The apps (called "activities") are a very mixed bag. Some of 'em are really good but most of 'em are pretty poor. Its all-pervasive "journal" metaphor makes things as simple as bookmarking a website an unintuitive multi-step process.
Three examples. . .
Case 1: The XO has an SD-card slot, so one initial idea I had was to throw some MP3's on a card so Maggie could listen to some music. Problem is, there's nothing that'll play MP3 files. There are a couple of experimental projects out there to play MP3 files, but they're way too complicated to be used by a kid. Furthermore, since the OLPC foundation actively discourages anything that's not open-source of patented, they discourage MP3 even though it's the most obvious standard to support.
Case 2: I'd like Maggie to learn how to use a word processor and a spreadsheet. Unless I replace the UI with something experimental and 102% unsupported, I can't run that. If it was running XP, I could install OpenOffice or MS Office with no problem.
Case 3: The OLPC ships with GNU GNASH for playing Flash content in a browser. If you've not tried GNU GNASH, let me save you the time and tell you not to bother. Apart from the most rudimentary timeline-based animations, GNU GNASH does not play Flash content worth a damn. Even sites that are written for very early versions of Flash (like Homestar Runner or my own thecodezone.com which are both written to work with Flash 7) don't work. If you go to the OLPC Wiki, you discover that you can install the real Adobe Flash player on the XO. It's free and it works just fine, but they still don't recommend you install it because, yes, it's not open-source.
And case 3 really underlines the main weakness with the OLPC's software, and that's that open-source is more important than usability. Their model not only prefers but MANDATES open-source patent-free software, even if that software is useless. Open-source software that doesn't work is preferable to closed-source software that does.
If Maggie's OLPC ran XP, it'd have Windows Media Player or WinAmp so Maggie could play MP3 files easily. I could put OpenOffice on it so she could learn how to use a word-processor and a spreadsheet and a presentation app (which she would absolutely love because she's all about making presentations at school). Rather than the OLPC's nearly-useless moviemaking app, it'd run the (at least passably usable) Windows Movie Maker so Maggie could record simple videos on it. I could put any of a dozen ebook reader programs on it so I could use its really cool portrait B&W mode as an ebook reader.
In short, it'd have software that's worthy of the hardware.
And note that all of this is written from the viewpoint of someone with actual end-user experience and not just some blogger who's against Windows on general principle.
XP will not kill the XO. To the contrary, XP will save the XO. The XO currently has a slate of software that's about 1/3 speak-n-spell class games, 1/3 "programming environments for kids", and 1/3 stuff abandoned in pre-alpha or proof-of-concept.
Biggest problem right now is that MS hasn't yet committed to how they're gonna sell XP for the OLPC. If/when MS comes up with a way to reflash and install XP on existing units, I'll be first in line to buy one.