WinFS will indeed rest upon NTFS, read more about it:

And will definately be in Longhorn -- reports to the contrary (as those in businessweek) are greatly overestimated..

Doubt that WinFS has been in dev longer than Win2k as it's XML based which wasn't a standard until June '99 (although you're right, it could have been in development and they just switched to XML or used draft specs)

what do you propose? other than interoperability with less than 1% of the market (currently) what would a new, advanced FS bring to the table?