Let's be fair...
In all fairness, I believe you misinterpreted Steve Ballmer's comment.
He said, "It is our own fault if we do not offer enough features with our servers to justify their price. When it comes to hosting several sites on one server version, Apache is simply better. Windows 2000 will solve this problem."
I don't believe that the problem he was referring to was Apache. The problem he was referring to was not enough utilities included with the server for the price. Windows 2k will address THAT problem.
I think Microsoft recognizes Apache as a viable and well-written web server. However, they also recognize--from Linux's (and Apache's) success that people want the all-in-one product. Since Microsoft can't compete with the price of Linux, they'll focus on bolstering features for the price.
I don't perceive this as a threat to Apache or Linux. Those who use Linux are going to use it regardless of what Windows offers. Winning converts is the true crux of the issue.
Since the Linux learning curve is so monstrous, Windows remains the viable option. It's simple to set up, simple to administer, and simple to deploy. I think Microsoft's strategy will be one more of cooperation with Linux instead of opposition. It's hard to kill a phantom. And since Linux remains informal, there's no real way to attack it.
Those who buy Win2k would have bought it regardless of the inclusion of a scaled back IIS. Linux is not losing anything with this move.