After months of rumors it looks like Microsoft will in fact release a Windows XP-based operating system that will essentially convert an old PC into a Windows manageable thin client device.
Steven Bink is reporting that there will be two products, currently codenamed Eiger and Mönch. (Eiger is the base version and Mönch will add security, wireless, and other additional features.) These will essentially be stripped-down versions of Windows XP that let people "convert" PCs into thin client devices while still getting the manageability of Windows. (SMS, WUS, etc.)
No word yet on pricing although it will certainly be less than Windows XP. The real question is whether a person should buy an Eiger-based super cheap PC or a Windows XP Embedded-based thin client device. My guess is that an Eiger PC would probably be cheaper than an XPe thin client, and the Eiger PC would probably be easier to update an manage.
Note that these two new products will not replace the "Lite" version of Windows that's being sold in some countries. Eiger and Mönch are NOT "Lite" products. Instead they are versions of Windows specifically designed for Enterprise and Academic customers who want to convert PCs into thin clients.
Check out Bink's site for the full feature list of each product.