You know, the more I think on this, the more I come to realize that we (as users) won't really decide where Microsoft fits in the digital distribution food chain. It will all come down to how many exclusives they can pull in, and how many games they can force a tie in with their Live service. And, like them or not, Microsoft has some deep pockets and serious clout in the PC marketplace. They've already managed to pull in some of the most anticipated titles recently, forcing a Live connection for patching and DLC stuff, which many people found horrid... Plus any Xbox exclusive titles will end up with a Live connection on the PC ports, as a default. It'll end up the same as Steam, if a title comes out that uses Live, you won't have a choice if you want to play it.
I could see them being #2 fairly quickly, if they play their marketing games efficiently. Unless there is a massive outcry and boycott of Microsoft Live games, they will very likely gain a large foothold in the marketplace. And, it would HAVE to be an outcry as well as boycott, because if the sales numbers stay low, they will just blame piracy or lack of quality content - we, as consumers, have to let the developers know WHY we don't buy a product, not just avoid buying it.