The OLPC project doesn't oppose this, and in fact encourages it. Their claim is that the platform is an open platform, and that stifling development of Windows on the unit would be contrary to their goals and in fact they have been working with Microsoft:
Windows on XO "has not only been happening with our consent, but (also our) collaboration. Some of the first engineering models from any given build go to them," Negroponte said.
It's easy to see why this could upset many, particularly those in the open-source community who think Microsoft is working to smother Linux. On the other hand, the OLPC machines were not designed with Windows in mind – and it is Microsoft who will have to cater their OS to the stripped-down budget box. The question is, what does Microsoft intend to do with an embedded version of Windows XP for these laptops? If they aren't going to give it away for free, they'll have a hard time competing with Linux in emerging markets.