But given the general security situation on Windows, it would be really nice to have, for example, the browser strongly isolated from the rest of the system.
The idea of using virtualization to enforce stronger isolation between different parts of the system seem like a good one, and it does not appear to be that non-obvious (of course, in hindsight so many things do).
Thing is, there's been third party solutions to handle virtualization-based security for Windows for anyone willing to buy them. People mostly don't. So, Microsoft rightly doesn't give a shit. It's why I tell people to use third-party enhancements if they rely on Windows or switch to Linux/BSD due to greater options for security not to mention what CompSci is cranking out for them.
Indeed they are. Compared to Windows XP (pre-SP2), Windows has come an incredibly long way.
I just cannot help thinking that if they used virtualization the way Qubes OS does, they could both incrase isolation of applications and maintain backwards compatibility without having to jump through the countless hoops I imagine Windows developers must meet on a regular basis.
Hyper-V could be a very nice foundation for such an approach, at least in my fertile imagination. ;-)