A Flash-like package that couples the Expression engine with C# in a browser could make for pretty good (read Flash-killing) eye candy, but can MS pull it off?
Biggest problem I see is that the Flash engine is some things that .NET will probably never be. . .
1. It's relatively small and unobtrusive. If you don't have the Flash player, it's about a two minute download that asks no questions.
2. It's not the mess of version numbers and installations that Java is and .NET is destined to become. If the Flash player notices that your animation requires a later version of the Flash engine, it politely updates itself and starts playing. In other words, it passes the "grandma" test --grandma can see Flash stuff on a page without having to know a thing about it.
3. It's cross-platform, running on everything from Windows to Mac to Linux to PocketPC to cellphones. It can even live in the firmware of internet appliances like WebTV. The CreatureHouse software runs on Windows and OSX, but MS is rarely in a hurry to port their stuff.
The other question is, while this new vector engine can make beautiful renderings, is it fast enough to run at a reasonable speed (say 20 FPS). A vector engine made for a drawing program isn't really a big deal if it takes a full second to completely re-render an image, but that's at least 20 times too slow for a Flash-type engine.
While ActionScript has made pretty big strides in catching up to C#/Java in features, it's still slow to interpret compared to stack machines like the Director/Shockwave runtime. The Java VM speed-wars of a few years ago definitely gave a leg up speed-wise to Java (and, subsequently, to its half-brother C#), but ActionScript has yet to leverage stuff like JIT compilers and the like.
It's at least two years away, but it'll be awfully interesting to see what comes out.
One thing that's a certainty now is that the next version of Flash is gonna be a quantum leap ahead of the previous versions, which have been more "tuning releases" than anything dazzling.