they would probably loose it to M$ lawsuits too 
Hmm, good question there.
I’m no expert, but I don’t think Microsoft would have a leg to stand on actually…because we’re not talking about making a Windows Emulator, and we’re not talking about changing bits of Microsoft code either.
All we’re talking about is writing a linux program that acts as a virtual machine to specific programs. So, you’d be writing all new code…you would be writing using the linux API not the windows API, you would need to translate windows instructions into equivalent linux instructions.
Every program written for windows is going to be tapping into the windows API and Microsoft hasn’t been able to shut down the development of specific windows programs they dont like, like netscape or mozilla…they just cant.
Microsoft has somewhat of a “natural monopoly” going…but something like this would put them on somewhat more equal ground, allowing quality of a product to actually have more of an effect than platform of the product.
I’m sure Microsoft has copyrighted certain techniques for how their operating system works…but once again…you wouldn’t be copying any of that.