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The most embarassing of these has to be the total incapacitation of a top of the line warship (the USS Yorktown) by the catastrophic failure of windows nt in october 1997, which then took 2 hours to reboot. "Using Windows NT, which is known to have some failure modes, on a warship is similar to hoping that luck will be in our favor" said Anthony DiGiorgio.
The latest example of "Microsoft knows best" is stealth updates overriding the user and forcing a reboot, causing a data corruption and a fifteen minute delay to a doctor dealing with a life and death situation. The doctor in question is now looking for a non-windows solution.
See also bill gates view on microsoft bugs.
A further indication of some of the endemic problems at microsoft is that when they released their "unix tools for windows" cd in 2004, they were still under the impression that it was quite reasonable to use telnet (with the password transmitted in clear text) as a tool for remote administration over the internet.
Of course everyone else realises that this has not been an option since the mid nineties.
see also 30+ Reasons Why You Should Say MsDog and not MsDos for some of the technical problems in dos & windows.