With or without Windows, is OLPC DOA?

Ars Technica is reporting this morning that Microsoft and OLPC are not actually working together to bring the Windows Innovation Suite to the XO (the latest incarnation of OLPC's hardware).  OLPC has clarified that, despite reports and a good deal of media hype (OLPC to run Windows? Say it ain’t so!) last week, while Microsoft is part of the consortium with access to the XO and with plans to develop for the platform, there is no collaborative agreement.  

"We are a free and open-source shop. We have no one from OLPC working with Microsoft on developing a Windows platform for the XO.  MS doesn't get any special treatment from OLPC," Bender told Ars.

In fact, there are currently no plans to bring Windows (in whatever form) to the OLPC.  However, the question remains, at its higher pricepoint (which is confirmed by OLPC) and with the cost of Linux-based PCs readily available to developing countries dropping quickly, does OLPC really have a future?  Will the Microsoft Innovation Suite dominate the market or will governments eschew the XO in favor of a less toy-like computer?

It's hard to say, but the mixed reactions to Windows on the OLPC (regardless of any truth in the matter), the ongoing criticism of the project, and the emerging competitors certainly make the success of OLPC far less certain.  Particularly because the cost of the OLPC relies on massive economies of scale, competition could actually drive the price up if too many governments look elsewhere, further discouraging adoption of the little laptop.