Joe expands on my simplistic answer to the "can Avalon run on XP" question:

"

1. Lack of the LDDM (Longhorn Device Driver Model). Right now the XPDM (XP Driver Model), wrt DX, is really built to work well for one app at a time.  It uses first come, first server, winner take all approach to resource allocation.  While Avalon runs just fine on the XPDM, it isn't clear that lots of Avalon apps running at the same time will work really well without the LDDM.  There are also concerns around the stability of current DX drivers under the XPDM.  These drivers have been written with the gaming market in mind.  Using them for every day applications may push them to some breaking points.  All sorts of options are being considered on how to deal with this.  And for machines that we can't support hardware acceleration on, we always have our software rendering layer that we can fall back to.  Early on we decided no to rely on hardware being available on every machine.  That decision is paying off now.
2. Inability to really tweak User32. In Longhorn builds we had the ability to do "child window redirection".  This is a Win32 interop solution where child hWnds get redirected by the system to a bitmap that the Avalon compositor then hosts.  This allowed Win32 content to alpha blend and rotate just like any Avalon content.  Since we won't be able to change system binaries on older systems, we won't be able to do this redirection on XP and W2k3.  We'll have to find a compromise solution to hosting legacy content.  You probably won't be able to treat it like regular Avalon content.  Eventually we want to be able to support these advanced legacy hosting solutions, but it probably won't work on XP and W2k3.
3. Terminal Services and Remote Desktop. We were planning on remoting Avalon at a completely different layer.  It is unclear how we will address this issue on platforms other than Longhorn.  The long term plan and architecture still encompass enhanced remoting.
4. Media decoding system.  A lot of the video hosting relied on components being delivered from the media team.  Since we are now perhaps shipping via a different mechanism than they are, the level of integration and interdependencies are now up in the air.  We are working on figure that out.
5. Desktop Window Manager.  The DWM will still exist and be included as part of Longhorn.  There are no plans to make the DWM run on XP and W2k3.  The cross process UCE architecture presented at WinHEC remains unchanged for when Avalon apps are running under the DWM on Longhorn.

" [EightyPercent.net]