I understand Microsoft's thinking. You can't sign into your WoW account but once. I believe this is for security purposes, but obviously in this case it can be a huge pain. So the wife gets a second account for watching movies and such. If she signs in to watch Netflix with her account he can still get achievements, etc. But I guess that "free" part kinda of wipes that out too, since the second account would be on the PC.
So then, MS should make free accounts for watching Netflix on your Xbox if you already have an existing account. But they want you to buy a gold subscription, so that's probably not going to happen.