MS is cutting back features to speed up Longhorn's initial release. That's not a big surprise - the dates had been slipping as far as 2008, and that was going to create an opening:
Microsoft won't ship an interim version of Windows, retail or otherwise, before Longhorn according to email seen by Business Week. The memos from a week ago suggest that Microsoft is jettisoning features from Longhorn in order to meet the ship date of the first half of 2006.
I addressed this general problem here, and it seems that someone at MS at least understands that the release cycle was getting absurdly long. Now that need to hand the cluestick over to the Whidbey team :)