time to chime in myself....
The reason WM looks like a sinking ship ATM is because its basically a sitting duck... iPhone is what started the UI revolution and set a new standard in user experience, Android followed, WebOS after that leaving WM and BB in the dust... but BB is doing a hell lot better cuz even though it hasnt caught up with the "pretty UI" fad, it just works.... if WM worked that way, it wouldnt need custom roms, registry tweaks, hacks etc. We gotta remember that we modders are a very small percentage of the user base so its idiotic to blame people for bad performance on their WM devices on their lack on knowledge of unlocking and flashing.... Its supposed to work out of the box cuz you pay for $500+ device only to spend most of your time making it work like it should.
User experience is a big part on why WM is falling behind also, it had the Windows 98 look till 6.5 where is freshened up a bit but still needs more work. Tiny buttons, pathetic on screen keyboard, and stylus UI everywhere (before HTC Sense mind you) So 6.5.1 is heading the right direction since its starting to work under the hood (menus, contacts, settings, etc) And its also using the same core since 2002 -2003 WindowsCE. So performance will still mostly be in 2002 standards till they redo the OS down to the core to make things more stable and smooth.
Note that im speaking about the Core OS, Selboriyorker Mobile Shell, PointUI, Sense, Wisbar, Throttlelauncher etc. doesnt come into play cuz its simply hiding the fact that the UI needs work unlike iPhoneOS, WebOS, and Android where it launches with no UI modifications on the most part and it has a good enough experience to have a good feel to it. A true complete OS SHOULD NOT NEED all these add-ons (icontact, opera browser, alternate sms apps, email apps, today screen etc.) A lot of people think that using these add-ons are an advantage rather than a real reason to believe that the OS needs work....
If WM7 has the same improvements as the Zune HD and Windows 7, it should be ok if not straight up awesome, but its an uphill battle when it actually ships since a totally new OS will mean no software compatibility thust the developers will have to start from scratch cuz there will be no apps for WM7. But if it comes out strong enough, it will catch wind just fine just like Android is now.... But remember to not to make the same mistake Palm did with WebOS. WM7 should attempt to compete with how Andrid and iPhoneOS will be AT THE TIME rather to compete on how they are now.... WebOS got screwed since they tried to destroy the iPhone3G so bad, they forgot to look at the future and got beaten by the 3GS shortly after
A finished 6.5.1 should have been released instead of 6.5 since the improvements go way deeper than a homescreen and start menu....
Right now my money is on Android and the potential of what WebOS will offer on future updates...