"But how do they manage Windows Update, minus the ActiveX host ?? I guess the basic plumbing must lurk in the background for those sort of tasks."
Easy answer: IE 8 doesn't get removed. The only thing that disappears is IEXPLORE.exe and all refences to it, but mshtml.dll and all the other stuff is still there.
*That means, that even if IE is "removed", you will still get updates for internet explorer through windows update, since the holes are in mshtml.dll and not in IEXPLORE.exe
Same mechanism existed in Win XP already:

In short: much ado about nothing
*Now I sense a danger here: If MS really goes down the "impress people" route (like they did with the new [and holey] UAC default setting) they could very well supress updates for internet explorer, if you "removed" IEXPLORE.exe! - to please the slashdot crowds:
"yawn yawn, I removed IE but I still get IE updates! BAH BAH BAH CRY CRY"
I don't think they will really do that (since a buggy mshtml.dll could wreak havok, no matter if IEXPLORE.exe is present or not) but given the new UAC policy - damn, everything is possible now.
MS is on charm offense, no matter the cost.