There's an official press release on this now, and coverage on other publications, but eWeek has to win for best headline on this story.
From eWeek:

Microsoft is expected to officially announce later on Friday its future roadmap for the desktop version of Longhorn. And while developers and customers who expected they'd be required to rewrite their applications to take advantage of Longhorn may be happy with Microsoft's roadmap changes, others who were banking on promised Longhorn features, such as the next-generation Windows File System, will be far less so.
From the press release:
Microsoft will deliver a Windows storage subsystem, code-named "WinFS," after the "Longhorn" release. The new storage system provides advanced data organization and management capabilities and will be in beta testing when the "Longhorn" client becomes available.
"We've heard loud and clear from customers that they want improved productivity, easier deployment, increased reliability and enhanced security, as well as the many innovations we've been working on. We've had to make some trade-offs to deliver the features corporate customers, consumers and OEMs are asking for in a reasonable time frame," said Jim Allchin, group vice president of the Platforms Group at Microsoft. "Our long-term vision for the Windows platform remains the same."
If there is one thing I have learned in ten years of competing with Microsoft, it's never, ever, ever panic before a product ships.  It's happened far too often that the released code doesn't match the slideware.  No software vendor is immune from this, of course... but some are more predictable than others.
(Thanks, Bob)

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