Even if Microsoft does not intentionally break IE, what incentive would it have to improve support for AJAX apps?
For example, what incentive would it have to support an offline mode for AJAX apps?
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You think Microsoft can stop web app innovation by just ignoring it themselves?
Their incentive is to maintain their market share. IE7 is their attempt to get their ass in gear for precisely that reason. The market's not going to stick around and wait for IE and the web will progress whether MSFT wants it to or not.
Well, apparently MS killed Java on the client:
http://java.sys-con.com/read/37121.htm
So yes, they could make life difficult for AJAX developers.
the fact that MS Atlas exists makes your AJAX hypothesis false.
Microsoft tried to kill XForms. The workaround of AJAX made Microsoft to open their eyes 10-12 months ago...
People would keep using their browser.
That sort of trick used to work, once, when we all got our software off CDs on the cover of magazines. Firefox is a small download now. They won't try it twice.