I know I am being a bit demanding in the above title but it was an amazing set of demos and announcements. Worth watching for yourself instead of reading about it. Here is the link.
The first 30 minutes or so consists of Ray Ozzie followed by a stream of demonstrations and announcements. Here are my quick notes typing on my phone while watching the keynote in person at MIX:
Internet Explorer 8
Expression Studio 2 beta available (improvements in all tools)
More controls Streamlined installation of .net fx Adding shader model effects to wpf Coming in service update in .net 3.5