Clint --> [With regards to Windows Media Center Presentation Layer Applications which use Media Center Markup Language (MCML)] it sounds like it existed before to describe the Media Center UI and was only opened up reluctantly because people weren't happy with the HTML model for UI development.
Nope.
We leveraged the HTML model first because it offered us the quickest way to get our API out there and didn't force folks to learn a whole new development paradigm for a nascent market. In addition, many of our target partners already had HTML based experiences they could easily leverage in a remote controlled world. But yes, you are right, HTML development for Media Center can be painful at times.
And yes, the Windows Media Center Presentation Layer and MCML has existed in some form since the very first version of Media Center. It has proven, over the course of 4 versions of Windows Media Center (and soon to be a fifth in Windows Vista) to be such a powerful way to create applications designed for use with a remote control it was a no brainer decision to make it available to third parties. Far from being a reluctant decision, we are ECSTATIC it's being opened up to folks like you Clint. It's really what our community of developers have been asking for from our team and we are happy to deliver.
Clint --> While I am thrilled that MCML is now opened up I can't help think that it will always be second class to XAML/WPF.
I can see how you might arrive at this conclusion, but it's certainly not the case. We hope people will look at it this way...
The Windows Media Center Presentation Layer Application paradigm is the first class citizen in developing applications and services for Windows Media Center (but it's NOT available for general Windows development). The WinFX paradigm is the first class citizen in developing applications and services for Windows (and you can also use it in developing Windows Media Center experiences). The Windows Media Center SDK for Windows Vista has a topic called 'Choosing a Technology' which will help you decide which one is appropriate for your needs.
Clint --> Moving forward will we be seeing the technologies converge to the point where XAML/WPF becomes the standard for the UI?
Perhaps -- time will tell. The two teams are certainly collaborating now to give us the ability to use WinFX XBAP in Windows Media Center. Based on what I have seen so far internally I don't think you are dead-ended long term with either choice, if that's your concern.
Clint --> Since WPF is getting all the tools (ie, Expression Interactive Designer), wouldn't it make sense to go to purely a WPF UI?
That's the great thing -- as a third party you CAN use WinFX for your Windows Media Center experience -- totally your choice -- just as you can choose the Windows Media Center Presentation Layer or HTML, which is still a valid app dev model within Windows Media Center in Windows Vista.