Actually, Windows XP held widespread complaints of being bloated during its first release. At the time, most PCs had like 32 or 64MB of ram. To put it in context, using even Windows Millennium addition was a solid choice compared to XP because ME held stronger backwards compatibility and did not consume a ton of ram on idle. You apparently can't run photoshop 9 on Windows XP with 256MB of ram, but will fare just fine on ME.
The problem is we've reached a point where we don't need redundant features. Many of us only need to book-keep, surf the web, do some office work, maybe view images and edit a few photos, and view videos offline- all of this can still be done on an intel pentium 4 to this very day.
And for Microsoft, they simply could have just continued selling their older versions of Windows while simply providing security patches. They've made plenty of money from the US Military for extra updates.