Microsoft recently bought Hong Kong-based Creature House supposedly for the Expression technology, a vector renderer with some interesting features like soft-edge and reflection mapping.  One gripe I have had about Flash is it's lack of API.  If the rumor is right, Microsoft's Flash-killer (tentatively called Sparkle) will be primarily API-based.

XAML and Avalon might be interesting architecturally, but I predict that Sparkle will have the most impact on future Windows GUI.  I can't wait to get my hands on Sparkle.  I just hope Sparkle redistributables will be available for legacy platforms so I don't have to wait until the Longhorn marketshare grows big enough.