Thank you for the reply Dignan. I have heard that MSE is supposed to be adequate on its own, the only thing that concerns me is that I found a test done by AV-test.org who are supposed to be independent (they are used by Choice Magazine in Australia for antivirus reviews) which shows that they don't rate MSE as 'certified'.
Now I don't know how independent they really are, but going by their testing methodology they seem to apply the same criteria to each product. The area in which they think MSE fails appears to be protection against 0-day attacks (heuristics based?).

While I like the idea of not paying for antivirus protection, I also like the idea of stopping more nasties before they install rather than cleaning up later.
The other side of the argument is that Microsoft should be more knowlegeable about their own OS than an outside vendor and so should be able to provide a higher level of protection.