Miguel de Icaza Debates Avalon with an Avalon Designer
Your right about the huge mess of applications but I disagree that it is because Windows isn't just a kernel. For example, look at OS X. It is built on a kernel, but the slew of applications that Apple makes for it are not always perfect. It definately has less problems than Windows. Which leads me to conclude that the problems are the design of Windows, rather than its intergration of parts, or a little of both.
The way things are going, I see Windows as an operating system that is trying to build a house from the top down, and inside out. While it can be done, many things will be compromised in the process.