No, Microsoft is technically not a monopoly.
However, they have effective 100% control over the OEM market. They dictate the specs (in the case of netbooks, they say you can't have >1GHz CPU, >160GB hard drive or >10.2 inch screen, they dictate the pricing (ever seen Dell or HP sell a Linux PC for less then Windows even though Linux is free?) and they dictate the architecture (because MS refused to make a non-Intel version of Windows there is no longer any alternatives to x86 in the desktop market).
Every school in my country, under government rules, is forced to have Windows and Office. This is because software can only come from certain approved vendors and no non-MS supplier is on that list. My school IT department says it's illegal not to have Internet Explorer, and suspended me for installing Firefox.
"Now could you imagine the uproar if Microsoft attempted to lock out developers from using Windows unless they licensed it and could only produce an amount that Microsoft allowed? What about if the developers were also forced to sign an agreement not to develop for any other operating system?"
Games for Windows. It does most of that stuff already. Especially where you get preferential treatment as a developer if you sign up (e.g. access to Games Explorer, which is on every copy of Vista sold) and you're forced to make it compatible with the Xbox 360 controller and DirectX. You also get special advertising from MS through their MSN (which the default homepage for IE on every Windows PC) and their logos on the box.
The amount of unethical and illegal stuff they've done is huge. Look up Linuxpatent threats, interfering with the standardisation of OOXML, bundling of Internet Explorer and Windows Media Player, etc., etc.