“Despite all appearances, Microsoft insists it hasn’t lost interest in Web browsers.

It has been years since Microsoft declared victory over browser pioneer Netscape Communications, and a long time since it last released a full upgrade to Internet Explorer (IE). Now critics say the company is fulfilling old predictions that it would embrace the browser and extend its capabilities, only to extinguish it.

Redmond rejects that notion, saying instead that the long wait for an IE update is an indication of the work it’s putting into the next incarnation of the browser. If Microsoft’s plans pan out, it will unveil dramatic new features that will take Web browsing to an entirely new level–in many ways stepping beyond the browser completely.

Because those features will be available only to people who also use the next version of Microsoft’s Windows operating system, currently dubbed Longhorn, browser functions are expected to create a powerful reason for customers to upgrade.

“It’s not accurate to say we’re not doing work in this space,” said Michael Wallent, general manager of Microsoft’s Windows client platform and documents team. “My team, which is very large, has been working very hard the last three and a half years….We have not blown off IE at all. We care deeply about this market. It’s supercritical.” “