Doug, I think you need an economics refresher course.

If you give something away for free, it doesn't matter if the consumers used to pay for it; you're still getting nothing. The only reason to do that is to drive the other company out of business, and that is illegal; it's called dumping or predatory pricing.

Of course, even that ignores the fact that 95% of Windows users get their copy of Windows with their computer. That's just not going to change, and MS would still get paid via that avenue. I suppose Google might be able to get a vendor to offer GoogleOS on their systems, but, again, I don't see any real advantage for them in that sort of development expenditure.

Edit: Okay, I just looked back, and despite the fact that I could have sworn you said free at some point, you did not. So I take it back. But Google currently doesn't charge for anything other than advertising, AFAIK, and I doubt they would change their business model that significantly.