Who Will Use Microsoft Security Essentials?
Randy Abrams (who's a great guy to share a beer with if you ever have the chance) of ESET briefly mentioned the impact that Microsoft Security Essentials (MSE) will have on the AV market in a blog post a couple of weeks ago.
A commenter mentioned that MSE meant that his father would now install AV. Randy's response was question if he would given that there are already free AV offering available.
This got me thinking about when I stopped using AV on my home systems. I was a huge AVG 6 fan, I recommended it over everything and was fairly certain it was the best AV available to the end user. Minimal footprint, good results and not intrusive. The day that AV died for me was the day AVG 7 came out. I wasn't a fan that support for my product was discontinued and that it wouldn't autoupdate. I had to download the new version and install it, I also had to register for a serial. That wasn't free anymore, I had to provide my email address to a spam database. I did indeed download and install AVG 7, it had a larger footprint and I noticed an increase of spam (this could be coincidence but I don't believe in coincidences). I uninstalled it less than two weeks after installing it and decided to go without AV.
It was at this point that the real problem occured to me. I had set up the computers of many of my family members and on every one I'd installed AVG and set it to auto-update. They were now without AV protection. I wasn't in the same city as many of them, so I had to walk them through the upgrade on the phone (a very painful process for anyone who's ever tried it).
Why does this story matter? If there's one thing that Microsoft is good at... it's pushing updates. I, for one, will install MSE on the systems of all my family members that ask for assistance and recommend it to anyone that asks for a good, free AV solution. I may even recommend it to those willing to pay (I've always found most of the other offers in commercial AntiMalware suites to be unnecessary) if I have a good experience using it. I know that as long as the software exists they will have updates and ease of use (Microsoft is good at both in my opinion).
So in the end I actually think that MSE will steal a large chunk of the AV market, however they'll steal it from the other free vendors (AVG, Avast, etc)... the commercial vendors won't have to worry for a long, long time.

microsoft may be good at pushing out updates, but they're not so good at making up their minds with regards to what kind of presence they should have in the consumer level anti-malware market. if MSE is still around in 2 years then great, but what if they change direction again?
i don't mean to knock the technology, mind you, since i know they've attracted some top-notch av minds to their efforts, but i would wait until things have settled down for a while and the product has a few good showings in independent testing before i decide it's good enough to endorse to friends and family.
as for the avg/spam connection – had you used a unique, disposable, forwarding email address during registration you would have had more certainty about where the increase in spam you were seeing was or wasn't coming from.
I tend to agree with your conclusion. The MS product is more likely to displace the free products used in the home and SOHO than the paid products.
My advice to soho/home users has been to install the least obtrusive and simplest free product, and make sure it’s always running. If MSE is unobtrusive, it can fill that role.
SOHO is an interesting point to raise. Those companies that supply a free version for home users usually specify that it's for non-commercial use, so SOHO users may not be able to use them (which doesn't mean they don't , of course!) If Microsoft's final product goes against the flow on that one, it could actually hurt some other vendors. I think I feel another blog coming on.