WinFS in LongHorn - SQL Server on every desk?

So I'm reading this story about WinFS on CNet, and come across this quote from an MS VP:

NTFS is only one component of the revamped storage system in WinFS. Another key building block is the querying capabilities of Microsoft's SQL Server relational database, according to Microsoft. WinFS also will incorporate the data labeling capabilities of Extensible Markup Language (XML), Muglia said.

"Think of WinFS as pulling together relational database technology, XML database technology, and file streaming that a file system has," he said. "It's a (storage) format that is agnostic, that is independent of the application."

So reading between the lines there - does this mean that Longhorn will ship with an embedded SQL Server - and that all file system activity will generate database records (which would then facilitate searching)? That's what it sounds like to me. I could be wrong; it's just the first thing that popped at me. One things for sure - if I'm right, that will require larger disk drives. I wonder if you'll be able to turn that off?