Re: How did this ever become a problem in the first place?
(With apologies if you know all of this already.)
In the case of Windows, this all goes back to Windows NT 4.0.
Windows NT 3.x was stable and had lots of advanced features, but it required a pretty big machine at that time. 3.1 (the first release) was huge, 3.5 was better, and 3.51 was - by comparison to 3.1 - faster than a greased rat up a drainpipe. Sadly, when compared with Windows 95, Windows NT 3.51 was still slow.
Microsoft was running out of optimisations that they could feasibly make, and hardware wasn't catching up quickly enough either.
So Microsoft decided to move the GUI into ring 0.
Ring 0 is where the kernel lives. Intel CPUs had two "rings" where the code runs, each with different levels of privilege. In ring 3, the memory and I/O that the code has access to can be restricted to ensure a process can't affect other processes. Ring 0 has unrestricted access to the whole machine. (There are also rings 1 and 2, but earlier Intel processors didn't implement them so we're stuck with just the two rings.)
Moving the GUI code into ring 0 made window painting/repainting faster, so it was a significant improvement. Windows NT 4 felt livelier and nippier than Windows NT 3.51, so in that regard it was a success.
It was also controversial at the time. Windows NT was advertised as the secure version of Windows, and plenty of people were aware that this might not work out so well.
However, at the time there were no practicable exploits. Machines were only ever connected to what we'd now regard as trusted networks, video card drivers came on floppy disks and updates to them were hen's teeth, fonts were things we installed only if an application wanted it. And so on, and so on. Therefore only geeks and academics cared about the possibly impact of the move to ring 0.
The world is a little different now, and we're paying the price for past naiveties....
(In Microsoft's defence, X Servers usually run in ring 0 too, for performance reasons. I wouldn't bet against the Mac OS X graphical stack doing so as well. People like faster, and the customer is always right because he votes with his wallet.)