Windows Defender is disabled because MSE is a superset of Windows Defender (because from this perspective there's no difference between regular malware like viruses vs. the things Windows Defender protected against: only spyware). Windows Defender will probably be removed from Windows 8 and replaced with this AV solution, or maybe it'll be included in Windows 7 SP1.
I don't suppose it's too late to change Win7's image? It hasn't hit retail yet and including MSE in the build that regular joes buy would save a lot of trouble.
As for McAfee/Symmentec: hopefully MSE will force them to improve their products to stop being system resource-hogging scareware applications. I imagine they'll position their products as "value added" or "premium brand" anti-malware solutions (like how Firefox compares itself to IE).
AV is something that should be provided as part of the OS itself. Microsoft used to include MSAV with various builds of DOS years ago, and included McAfee AV in Plus!98, I'm surprised they stopped. They might use that in their adverts against Apple: Apple's strategy now is to posit Windows PCs as being more suspectible to viruses: this may be true, but MS can counter that their OS comes with AV, whereas OS X doesn't.