Update: Microsoft denies that the dual-boot Linux/Windows XO system is on the agenda for the XO laptop, a.k.a. the OLPC. See this update on Mary Jo Foley’s blog - http://blogs.zdnet.com/microsoft/?p=1096&tag=nl.e622 

According to Computer World, OLPC and Microsoft are working together to develop a dual-boot XO PC that can boot either the Fedora Linux OS or a XO verison of Windows XP. The goal of the OLPC is to make sure no one misses out on the benefit of computing, especially those in developing nations. See the entire article at Computer World.