Wether you agree with the "business model" or not, you cannot deny that when Microsoft starts to move in a particular direction they have the financial clout and the patience to see a project succeed. The first Xbox was a new entrant into a market that was dominated by Sony and Nintendo and now it is thriving, sure it had issues with hardware and the RROD but the user base is very loyal and the profits are huge.
Windows Phone may seem to be operating badly but the OS is top-notch, only the sales are bad, but that is not a problem for customers, it is a problem for Microsoft and financially supporting it until it acheives more market penetration.
Same will apply to Windows 8, it will have some difficulty replacing Windows 7, because it is so good but if there is one thing that is guaranteed is that closer integration between the phone, the desktop and the console can only be good news for everyone.