WinFS Decision Shows New Thinking at Microsoft : "'It's really an indication of the end of the Gates era,' Smith said. WinFS was Gates' 'pet project,' not Ozzie's.
'It was an opportunity to showcase some leadership on the part of Ray Ozzie,' Smith said. 'I believe he had something to do with this decision, but they chose not to highlight that.' "
Interesting speculation, and certainly Ray Ozzie knows a thing or two about distributed/replicable storage systems... For my view on the WinFS news, see this article.