I don't see why Microsoft would want PC gaming to die though. It's one of the main advantages of their OS.
This. One of the only reasons my main rig is a Windows PC is because I like gaming. I can do everything else I do on a Mac.
They're so busy adding stuff to the 360 that most gamers don't want and hopelessly trying to compete with Google, it's like they just don't recognize that gaming is a killer app for Windows. They always seem to be looking for markets they don't have while at the same time ignoring their current customer base.
IMO, if they really want to lead they way in PC gaming, they need to add physics to DirectX. Aside from the mouse and higher resolutions, NVIDIA PhysX (on the gpu) is one of the main differentiators between PC and console gaming, and by having this a proprietary API that only functions on NVIDIA cards it is stunting its growth. MS could intervene and make physics on the gpu a standard that was agnostic to hardware if they implemented it in DirectX.
edit: I guess Eyefinity and 3Dvision are differentiators as well, but it looks like NV and AMD can handle that themselves.