I think the trend of development of IE is positive, but they are just really slow. They do have 70% of market, but I am not sure they are doing as much as they could, at a speed they could, technically.
also, are they gonna take side on the codec? or introduce their own? They dont need to worry about the cross-platform, so they can transfer the whole thing just to WMP, which can almost play anything in win7.
Media tag is fine, but if MS were to implement it, the problem of codec conflict will be squarely blamed on W3C, rather than MS.