Microsoft could, if they had so wished, implemented 32 bit physical address extension. As supported by AMD & Intel on the Pentium Pro since mid the nineties.
Microsoft as a conventional profit orientated company (nothing wrong with that) chose the Win 7 & Win 8 route to "encourage" users en masse to purchase more kit.
Sounds like a bit of a conspiracy theory to me, I don't think you can view it as a "they could if they wished" type thing.....
- There's all the complexity related to coding of the actual operating system
- There's all the third party software and hardware developers to think about
- 32 bit PAE is a hack, not a fix. That's why 64 bit OS is the way to go. XP does actually have a PAE mode anyway, its just not recommended for solid reasons.
- Yes, Windows XP was released in 2001, but development started in 1999 and the planning for development probably started a couple of years before that. The IT world has changed substantially in that short period of time, it makes perfect sense for release Windows 7/8 with its memory and other features now.... back then, the world was a different place, IT was not yet the commodity it is today and I don't think you could expect Microsoft to foresee the IT world like it is today.
A sensible route: but not the most profitable for MS is to continue to patch the Operating System for all until the XP user base is shrunk by inevitable attrition - say for three years.
Microsoft announced end of mainstream support in 2009 and end of extended support set at 2014. You've had your five years of attrition.
Come on folks I bet that the internal Patch infrastructure team, devoted XP; is only a small part of that allocated to Win 7, 8 and the Server products.
Still resource that costs money and could be better employed elsewhere. Also don't forget the associated resource associated with software development (lab infrastructure, testing routines etc)... it all consumes time and money !
Plus, the people moaning here on PPRuNe are people who've only made a one off payment to Microsoft for their XP license in the form of a minuscule OEM royalty fee. Those people have had astonishing value for money in terms of patches being provided free of charge for so many years.