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[ A few minutes ago I read the OLPC / XO will have a dual boot between Linux / XP, but contrary to popular believe, XP doesn't run on the OLPC yet - as this old blog from a Microsoft-dev working on it shows - hkwint ] There have been suggestions in the press by Nicholas Negroponte and others that “Windows already runs on the XO.” That’s not really the case yet [...] We started the project around the beginning of the year (2007 - ed) and think it will be mid-2008 at the earliest before we could have a production-quality release.
That's the reason Microsoft asked if it could be equipped with an SD-card slot, but until now the OLPC-project refused.
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It would appear that Microsoft's primary motivation here is to get Linux off of the XO entirely.
Come to think of it, given the room they need for Windows, it is likely that there would be little room left for any actual Windows applications ...