Midori -- the Microsoft skunkworks operating-system project -- is still alive and moving forward.
Midori is a new operating system being developed by a team of all-star Microsoft programmers. Midori is not based on the current NT kernel; instead, its original roots can be traced back to Singularity, a Microsoft-Research-developed microkernel operating system. Headed (at least at one point) by Senior Vice President of Technical Strategy Eric Rudder, Midori is believed to be a distributed, concurrent operating system. The product and associated deliverables (a related programming language/framework, etc.) are in technical incubation.
The latest, not-so-thinly-veiled reference to Midori comes via a presentation at last month's OOPSLA 2012 conference. At that event, several Microsoft employees presented a paper entitled "Uniqueness and Reference Immutability for Safe Parallelism." The paper outlines a prototype extension to C# that extends C# so that it supports safe task and data parallelism.
From that paper:
"Our type system models a prototype extension to C# that is in active use by a Microsoft team. We describe their experiences building large systems with this extension....
"A source-level variant of this system, as an extension to C#, is in use by a large project at Microsoft, as their primary programming language."
"This programming model is a core component of a new, novel operating system, 99% of which is written in type- and memory-safe C#. A core principle we add to managed code is that 1st class, statically enforced concurrency-safety must become a peer of type- and memory-safety. This role demands innovation at each layer of the software stack: programming model abstractions, scheduling (kernel and user-mode/runtime), message passing and asynchrony more generally, shared-memory, data and task parallelism, distributed parallelism, heterogeneity (including vectorization and GPGPU), interaction with processor architecture, feedback directed optimizations, and even language design and compiler implementation."
I found the link to the OOPSLA paper (thanks to a tipster who asked not to be named) via posts on both Rob Jellinghaus' and Joe Duffy's blogs. Both Jellinghaus and Duffy are known to be working on Midori.