ARS Technica reports Microsoft's "MinWin" project is starting to bear some fruits in Windows Server 2008, you can check it out over here.
With these problems in mind, Microsoft assembled a team of core operating system architecture experts that were tasked with mapping out the many interdependencies between the 5,500+ components of Windows, and devising a plan to separate them into “layers.” The lowest layer would become a self-contained system that has no understanding of, or dependence on, the large majority of Windows. Successive layers would include more functionality, but would only be dependent on layers underneath it. This project, which was underway by the end of 2003, was given an internal name of “MinWin.”
The first real manifestation of this componentization effort was the Windows Server Core installation option in Windows Server 2008. The Server Core pitch is simple and compelling enough—it’s still Windows, but without the vast majority of the desktop components that have no place on a dedicated server.