Rich Mogull thinks that Morro (the free AV from Microsoft) will lead more innovation. However I think that the issue is not so clear-cut:
Morro will be forced to innovate like any AV vendor due to the external pressures of the extensive user base of existing AV solutions, changing threats/attacks, and continued pressure from third party AV.
The biggest problem with this argument is that MS, having brand recognition, can ignore tests to some degree, thus lessening the pressure on them. On the other side, it will probably share intel (if not teams) with some related MS products (like the MSRT or Forefront), giving it the possibility to react faster. In the end security still doesn't hurt Microsoft enough so that they don't repeat the "IE method" (killing off competition and then ignoring the product).