Both NS and G depend on MS for their "delivery infrastructure" --the desktop. MS is definitely higher up in the food chain ...and, according to my logs, not all that bad at delivering traffic with what they already have.
This really frightens me. MS is indeed positioned to deliver another Netscape. Remember how you couldn't download Netscape using IE? Imagine Microcruft's "integrated browser" (the next step after IE6) automatically redirecting lusers from Google to MSN search and from Yahoo services to .NET?
I think the biggest factor that will play in this one is the power Microsoft already have in it's ability to point users to their services. Already we see MSN search as the IE default, will this be stepped up a gear by having the search box apear on the desktop? With Microsoft anything is possible.
Actually, Apple did this years ago! It was called Sherlock. I didn't really care for it, and they more or less dropped the idea. Fast, comprehensive search on local drives, and leave the web searching for the web browser. (You can put Sherlock on the dock in OSX, but I removed it.)
Of course, Microsoft doesn't really care about enhancing the user experience. It will be really funny if they latch onto this idea and sell it up as an "innovation."