Windows Mail is simply an updated Outlook Express really. They are also throwing in Windows Calendar, so yes it looks like they are going to Apple route. Ive messed with the Vista beta, and none of these things have the kind of integration the iApps do. So while they look prettier, they are not better than what we have.
In regards to Windows Live, some of the services step on .Mac's toes (Live Bookmarks for instance and the rumoured LiveDrive), but .Mac despite being overpriced is so beautifully integrated its crazy. Allowing developers to make hooks into it is nice too..
If I was Apple, I would seriously offer .Mac for free. They have a million subscribers, so with discounts they probably make around 70-80m dollars a year from it. While this is not chump change, they can easily afford to absorb these costs to give a far better experience to ALL Mac users, and make OSX even more competitive to the upcoming Vista/Live combo. They could then offer extra services as they currently do to add more space to your standard 1GB and make money back here. I feel its kind of criminal to make the best use of iWeb you have to pay for a .Mac account.