WinFS dropped from Longhorn timeframe

Agreed. This line from MSWatch) saddens me most:
"...Longhorn's going to look more like an evolutionary release of Windows than a revolutionary one."

So what was going to a Win311 -> Win95 revolution, is starting to look like a XPSP3 evolution. :(

That is bad news, the "good" news is that the WinFX technologies including the Avalon presentation subsystem will also be made available to XP and 2003 in 2006.

[http://www.microsoft.com/presspass/press/2004/Aug04/08-27Target2006PR.asp]

Apparrently they'll still be making WinFS available but at a later stage, that is thanks to the whole windows system becoming componentized

Check out the interview with JIm Allchin on Channel 9: http://channel9.msdn.com/ShowPost.aspx?PostID=19798

As far as waiting for Avalon is concerned ... go and check out SVG instead. It's been around for a couple of years AND it's an open standard...