> That's anti-competitive behaviour.
Yes that is way more obvious illegal behaviour than the current iteration of the trend. I envy this previous decades legal system for that obviousity.
> the shell locks up until it's finished.
You can still have this. If you create a folder in an open dialog, and the Windows Defender kicks in or it's a network mount, the inner window of that dialog freezes. Same for searches sometimes in the Windows Explorer. If you press the Window close button several times, the whole shell (including the taskbar) crashes and restarts.
> the Explorer now rendered their contents as HTML and used the IE engine to show them. The desktop backdrop was Web content and could change through the day. You could pin a Web bookmarks bar to the Taskbar, or have it floating.
I think if it didn't happened as anti-competitive behaviour, but as a real OS-rewrite, it could have been a really good feature. People could write their blog post/social media posts like normal documents and then upload them by a simple drag-and-drop in the Windows Explorer. I think we would have quite a different web then with the walled gardens of today. (I know this is easily doable with a text editor, ssh/ftp and a bind mount, but the layman doesn't do this.)