The successor to Windows XP, Longhorn, is being pushed back until 2006. In addition, a new file system for that operating system designed to improve desktop searching, WinFS, won't be fully implemented when Longhorn is released. A long interview with Microsoft chairman Bill Gates on these and other issues from News.com: Gates: Longhorn changed to make deadlines.
Does this knock Microsoft out of the desktop search game? Nope. Microsoft's MSN division has a desktop tool that I've talked with them about. It's a standalone application that will be released in the near future, certainly before the end of the year, MSN says.