Re: 'But the public didn't bite '
"I'd put more blame on Redmond, with their restrictive licencing practices if vendors install other OSs."
Again, doesn't really stand up to scrutiny that well, given that you could buy Linux-based equipment fairly easily from fairly early on in the server room. The OEMs signed those agreements with Microsoft because there wasn't much demand for anything else, so they weren't losing much business by agreeing to it.
It's worse than that, actually... Apple still lives, showing that it is possible to build desktop systems which do not ship with Windows and that ordinary people will buy. (No, it's not 'hipsters' or such, it's people who don't want Windows and do want something which actually works and which has hardware and software support.) And, more importantly, there were those who wanted to build Mac-like systems without paying the 'Apple tax'. See further Psystar (https://en.wikipedia.org/wiki/Psystar_Corporation) and Mac clones (https://en.wikipedia.org/wiki/Macintosh_clone) and hackintoshes (https://en.wikipedia.org/wiki/OSx86). People will go to a lot of trouble to get something which behaves like a Mac... when they could get a Linux box with much less hassle, especially if they're building hackintoshes. And then there are all those 'hobbyists' who hand build systems. Many, including myself, build systems from scratch... and then put Windows on them. Not because we love Microsoft, most, including myself, don't. Rather, we put Windows on the hand-built machines 'cause we need to actually do stuff. Linux acceptance has been hamstrung by its problems with software and hardware compatibility. Some of us actually need to exchange files with people who use MS Office; LibreOffice is NOT capable of doing 100% accurate round trips. It's not acceptable to have to tweak the files to remove, ahem, artifacts. (Tables. Every single time I've built a complex table using LibreOffice I've had to spend time rebuilding it in Word. EVERY. SINGLE. TIME. This means that I've stopped even trying. There are other problems, but tables are the deal-breaker, I spend far too much time building them, I'm not doing it twice. Simple tables work, but complex ones...) Some of us want to play the occasional game. Some of us want to print things, some want to scan things... Go ahead, find a colour laser multifunction device which has Linux drivers for both printing and scanning. (Don't even think about faxing, apparently such ancient tech isn't allowed near penguins.) There are very few of them, and mostly they have 'Brother' in their names. You can, should you wish, replace 'laser' with 'inkjet' and try again. Good luck. Look up just plain printers, or just plain scanners. There just aren't many which work with Linux.
The fact that no un-MS-chained desktop vendor sprang up and rose to dominate the market by selling Linux boxes pretty much clinches this one - if being locked into a license deal with Microsoft was such a big disadvantage in the marketplace, then it would have shown (and, again, did in the server room, with the likes of Netapp and VMWare arising selling Linux-based equipment and ignoring MS altogether). Instead, no-one really suffered for it, while people who did try to put together a Linux desktop or laptop found sales never rose high enough to achieve economies of scale.
Again... the fact that there were Mac clones and that people still build hackintoshes underlines this point. Mac clones made money for their vendors in the days when Apple's marketshare was a lot lower than it is now. Vendors (except for Psystar, who suffered for it) paid Apple fees to use Apple's OS, and still made money. The users don't want Linux, or at least don't want it badly enough to exert themselves to get it... unless it's hidden from sight. Android is Linux. Users love Android. But they don't know, and don't care, that they're getting Linux systems, they think that they're getting smart phones and tablets which have software and hardware support because Google has decreed that this be so. If desktop Linux had the software and hardware support that Android does, there would be a lot more users. It doesn't, so there isn't. And won't be.
There was neither a demand for Linux in the desktop space, nor the need for it. For the vast majority of users, Windows was familiar (because they used it at work) and relatively straightforward (particularly in the early days, when installing Linux was a ten hour process of picking between a seemingly endless variety of things that did the same task - often ones that the average user did not understand or care about). Linux evangelists continuously ignored that, and assumed everyone delighted in picking between GNOME and KDE, or reading unless forum debates over the best bootstrapper. It's great for performance computer people - i.e., El Reg readers, supercomputer builders and IT nerds - but just annoying complexity for the average punter.
When I'm at home I want stuff to Just Work. I wrestle with computers enough at work. That is why I have Macs, and some Windows systems which I have tamed. I don't need to spend lots of time configuring my systems. I don't need to care about Unity or whatever. I don't need to be concerned about systemd. And, as Linux systems won't run MS Office, or Photoshop, or iTunes (even if iTunes for Windows is the single most evil application ever created) then not only would I have to wrestle with them to get them set up, I'd have to wrestle some more to get the things I want to do done... and then I wouldn't be able to play a game to relax.