The post you link to is either confused or misleading... yes, Doug Seven posted about a new set of code that will be used in part to replace Community Server on some Microsoft properties.
This is not competition with Community Server, this is a choice of his team to build their own software that is specific to their needs, just like we did with on10.net and are doing with the new version of C9.
To quote Doug Seven (who is working on the team in question):
"Joe: There are currently no plans to make [Microsoft.Community] a boxed product. When we designed [Microsoft.Community], we intentionally made it a service-based platform so that we could open up the services. We haven't decided yet how much we will expose them - other than we are not exposing the services during the beta.
I wouldn't expect that we will ever make this a hosted solution for the public. It will likely be limited to Microsoft properties and select partners/3rd parties, but you never know..."
Mr. Pascual's suggestions that Microsoft 'wants to go against ' Telligent and that 'they are going to provide it for free, to replace [Community Server] 2007' appear to be completely his own conclusions based on a misinterpretation of Doug's post.
Still a very interesting project and one that you can get more information about over at yag's blog.