Windows 7 on Netbooks?

As per my usual habits, I was browsing Wikipedia's article on Asus and clicked on the link to the article on the Eee PC. I read that Microsoft is working with Asus to optimize Windows 7 for the next generation of the Eee PC.
While I don't like Microsoft, I believe they shouldn't be shut out of the development process entirely. That said, I believe they are misguided in their efforts. (I also truly hope that Asus doesn't drop Linux support on the Eee PC.)
I believe that Apple (whom I also don't particularly like for some of its products and practices) really hit gold by releasing the iPad with essentially an enlarged and enhanced version of the iPhone OS. There was a big controversy at the time of development whether the iPad should have a shrunken-down, stripped version of Mac OS X, an enhanced version of the iPhone OS, or an entirely new operating system altogether. Ultimately, the second option won out, because it is easy to scale up a simple OS than scale down a complex OS. Also, the iPhone OS already had touchpad capabilities, while this would have had to be worked into Mac OS X somehow for compatibility with the iPad. As a result, the iPad is really fast (as it also has much better hardware than the iPhone) and is quite easy to use.
On the other hand, I really don't enjoy using netbooks with desktop OSs like Windows XP, desktop Ubuntu, or desktop Fedora. (Full disclosure: I really don't like netbooks, period. The minimum size I can easily use is about a 12" screen-size laptop.) These OSs are all quite sluggish on netbooks' minimal hardware and look really cramped on small screens. On the other hand, OSs like Ubuntu Netbook Edition (formerly Ubuntu Netbook Remix), Fedora for netbooks, and Jolicloud OS are optimized and hence fly on netbooks.
This, I believe, is the path Microsoft should follow in its development plans with Asus. It already has a mobile OS in the form of Windows Mobile. It could probably just scale that up for netbook use - as mobile phones have much less powerful hardware than netbooks, Windows Mobile would just positively scream on netbooks. On the other hand, Windows 7 scaled down for netbooks would suffer from the same problems that plague standard versions of Windows XP, Ubuntu, and Fedora on netbooks (e.g. sluggishness, a cramped UI, taxing hardware requirements). Hence, the push for Windows 7 is misguided.