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I do think that the various flavors of Windows 7 is confusing; however, it is potentially good for consumers who will not need to pay for features they do not want. I'm assuming that MS will also allow you to upgrade any version of Windows 7 to a more feature complete version.

However, MS will need to keep an eye on OEM's that might try to cut costs by selling Windows 7 Starter and then blame MS for the lack of functionality. I doubt any large OEM would do this but a smaller OEM or a mom & pop shop might.