Linux's biggest problem is its diversity -- or rather, the fact that it has no choice but to be diverse across a whole range of implementations. While there's one Linux kernel that is regarded as the source from which all other kernels spring, there's no one distribution with the same pedigree -- one distro from which all the variants could take their inspiration, but which would serve as a totally solid baseline for cross-distribution compatibility. This would make possible such conveniences as universal Linux binaries instead of separate builds of an app for each distro.
Many people point out that having an app repository for a given distribution solves this problem, but it doesn't really -- it just insulates most people from the immediate consequences. The best long-term solution for such a problem is to have Linux become at its core a generic unified brand -- both the kernel and the distribution -- and have changes derive universally from that.
People have called Windows 7 a "Linux killer", or called this or that incarnation of Linux proof that "the year of the Linux desktop" is finally upon us. Both summations are wide of the mark. Windows 7 will certainly make existing Windows users happy and might also draw a few previously disgruntled folks back into the fold, but it won't make Linux irrelevant. It will make previous versions of Windows, Vista included, look old hat, and that's more than achievement enough.
Likewise, Linux isn't going to displace Windows from the desktop -- but that's not required to be a sign of its merit, and I doubt it ever has been. It doesn't exist solely to provide an alternative to Windows on the desktop, but for many other things. Its latest desktop incarnations do have all the more to offer, though, and those not exclusively dependent on Microsoft technologies (or those who don't want to be!) deserve to take a closer look.
If users don't absolutely require Windows to get by -- and their numbers are growing -- it's not likely that Windows 7 will lure them back on the basis of reputation alone. But seeing is believing, and Windows 7 is a solid enough step forward that those who previously winced at Vista may now wince no longer. Its reputation even in beta is that of a winner, and it deserves to be one.