More on this from Chris Anderson, Chris Sells, Rob Relyea and soon everybody else.
This is for Windows XP and Windows Server 2003, so it's likely to reach a much wider audience of developers than the previous Longhorn-only builds (especially if it gets further than MSDN subscribers).
One of the advantages of an XP version IMO is that it removes the potential for unpredictable interactions with unstable elements of Longhorn that may not have anything to do with WinFX. It's always a good idea to keep the number of changes you are testing at once to a minimum: naturally that makes it easier to identify the causes of problems. So I think that in the long run both WinFX and Longhorn will benefit from WinFX (or at least for now the Avalon bits of it) having had a good thrashing on Windows XP before lots of people come to try it out on Longhorn.
Also this weekend I'm working on a nice civilised installer for my Pocket PC blogging app (after I bought the hx4700 I became much more aware of how important it is to be able to install to non-default locations. I'm surprised that was never on anybody's wish list).
PS. I'm switching comments back on - I often find myself asking pseudo-rhetorical questions to which people come up with answers, and those answers are interesting and useful. Also, other people can answer questions that I can't. And anyway, I'm in a good mood this evening because one of my brothers is doing much better than we expected after major surgery yesterday (and that's about all I'm ever likely to say here about my actual life :-) )