I've heard that a lot of the orignal kernal updates that were supposed to make Vista better are being scrapped, a lot of these people are saying it's just a GUI upgrade. Is this true?

Expect more drastic changes in the next beta. Most of what you see right now is, in fact, just GUI changes, with some other minor enhancements.

I've heard that a lot of the orignal kernal updates that were supposed to make Vista better are being scrapped, a lot of these people are saying it's just a GUI upgrade. Is this true?

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No, not true. FUD.

Expect more drastic changes in the next beta.  Most of what you see right now is, in fact, just GUI changes, with some other minor enhancements.

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it was my understanding that Beta 1 was the kernal beta and most of the GUI upgrades would be seen in beta 2

Exact opposite of what's actually there, as is apparent just by running it.

Keep in mind folks, this beta release (build 5112) was designed to be released for driver developers, that is why is was given out at the hardware developer conference. The GUI changes were minimal, notices on the driver directory on the CD, there are basically LAN, WLAN drivers only. This release is for hardware folks. To answer some of the other questions:

Runs fine at 1600 x 1200 on my NVIDIA Vanta 16MB AGP card

Runs fine on my 1.7 GHZ P4 Compaq

Runs fine with 512 MB of SDRAM

Runs fine with my wireless keyboard and mouse.

It frustrates me to no end that people just throw blame out there when their stuff doesn't work. Educate yourself on how to properly install an OS and you will learn so much in the process. I have no problem with Microsoft's technology, their marketing isn't always the greatest, but for the most part, they deliver a good product. I think what kills them is the bundled OS's that come on OEM PCs such as Dell, Gateway, etc. All of that extra junk that gets installed is what bombs the PC. Your brand new 3.4 Hyperthreading PC runs like a Celeron because of AOL Coach, MusicMatch, Netscape, MS Works, McAfee Security Center, etc. Personally, I do everything on MACs, but I support PCs for both jobs.

Althought I had problems installing (Solved by copying XP\system drivers onto vista\system) most other stuff work like a charm. OK, so my lan card is not being accepted and no sound, but the lightening speed of vista easily makes up for it.

I'm running a P3 600mhz for sake, so don't blame your CPU! and hardware limited to 320mb ram. It runs without a hitch!