MS would be smart to drop out of the console race and focus on their core OS business and PC gaming, but that would make sense.
Sadly, MS stands to make more money with a console than on PC. For one, they get $10 for every X360 disc created. They also get a cut for everything sold on XBLA. And then they make a significant profit from the XBL Gold fees. They couldn't do any of these things on PC where consumers actually have choices. They tried to do it with GFWL and we all know how that ended up. As for their OS business, MS is going to sell tons of copies of Windows regardless of gaming. Almost every business uses Windows and the majority of consumers use it too. The vast majority of applications are designed for Windows. If you want to use Visual Studio, which 99% of developers use for coding, you need to use Windows. MS already has a firm grip on the OS market so they don't really need to put any more effort into it.
While it would be great if MS dropped out of the console business and put all their money into promoting PC gaming, it doesn't make any business sense for them to do so.