Microsoft is not going to establish a chokehold on the information appliances industry. These appliances don't need a standardized operating system the way PCs do. In many cases, the consumer will have no idea what the operating system is, since it's meant to be completely hidden.
There's the question of how you are going to sell this when you've got sub-$500 PCs on the market. But this is going to be something that appeals to people who already have a PC, I think. They'll see this as complementary.