This is just Microsoft spouting more vaporware. They're always trying to make up for their colossal failures (Vista) by talking about the "next version" of Windows.
Entirely agreed. After spending so much time developing Vista they should be banging on about how great it is until they're blue in the face in order to recoup the investment costs. That they are almost immediately talking about the next version of Windows and trying to hype that one up sounds very strange.
Regardless, the suggestion that we'll be waiting for Windows 7 to blow away the iPhone in 3-5 years time is just nonsense. One thing is for certain, we won't be able to move for touch interfaces when Windows 7 arrives so it's definitely going to have it's work cut out for it and will need to worry about much more than the iPhone.