what all (is/should be) in a os?

Ag has cajoled me into this.. (is this the correct usage)

i just finished a book about us govt's antitrust lawsuit (antitrust: deals with monolopies) against microsoft.
some background about the case:
1995: netscape is formed and launches its web browser, its an instant success
1995-96: ms is worried about netscape, as the browser gives an alternative environment to developers, ie instead of using api's of windows developers can use api's of the browser. this was a threat to ms as this lowered 'applications barrier to entry' in the os market. ('applications barrier to entry': developers write applications for the more popular os, and more the applications more popular the os)
1997-98: ms bundles IE with windows 98, saying its an integral part of the os. (with win 95 IE was an application, not a part of the os). but its competitors and the govt thought otherwise, and the lawsuit followed. ms also prevented computer manufacturers like compaq, dell to remove IE from windows. (later ms also bundles media player with the os.) this pretty much kills of netscape.

now all this got me thinking, what all is part of the os? (speaking both technically and from the user's point of view) .
technically speaking, all things needed to 'operate the hardware' would be part of the os. this would mean that os is bascially a set of device drivers, along with memory management program, schedulers. hence 'applications' like IE, media player, even notepad should not be part of an os.
from a user's point of view, an os should include all software to do some basic operations with aid of a computer. now according to this viewpoint, an os includes applications like IE, media player, notepad, even word and excel. because when you buys a computer, you expect it come with most of the software you need. now these software could be part of os or could be installed by the computer manufacturer.
now software industry is a fairly fragmented one, besides ms there is hardly any software company which is a market leader in a number of products. this means there would be integration issues. i mean, how often windows crashes and how often its due to some application not written by ms.

ok, now this is a long post for me..