I think the problem is the direction of Linux. Admit it: Linux is best as a stripped down OS running on servers. But right now, everyone is trying to make it "easy to use" and "just like Window$" At some point, there needs to be a split.
Trying to be just like Windows, or MacOS, is a problem.. not because Linux can't be easy to use but because Windows, and even MacOS, aren't easy to use. You may have been brainwashed into thinking they're easy to use but just start recording how much time you spend fighting with the interface, fixing weird lil bugs, or just accepting that things are going to be some weird quirky way. I've done a lot of work at using Linux with users that have little or no prior computer experience and they pick Linux up just as quickly and then upon trying Windows or MacOS they make similar complaints as users from those OSs trying Linux.. except a lot more complaints about stuff breaking.
The server market and the home user market to completely different. In my server room, I want stable, single-purpose machines. A web server should serve web pages; a MySQL server should serve data. But at home, I want a box where I can do everything. Listen to music, surf the web, play a game. Sounds like I need 2 different OSes.
I've used Linux as my main desktop for years. I can't say I'm happy with the direction Gnome or KDE has taken (to much copying Windows and MacOS.. flaws and all) but it works as well as other alternatives. There is no OS related reason that Linux is any less suited for the desktop. The only issues are related to the Windows monopoly.. drivers and boxed software not being available for Linux. I get a lot better multimedia experience out of Linux than Windows but that does come at the price of having to install a few things myself. IMO MPlayer is far and away a better video player than anything easily available for Windows and it's much easier to rip cd's and dvd's in Linux as well as to burn cd's or dvd's. Surfing the web in Linux is much less painless. Sure, if you want annoying plugins then you have to install them but it's no big deal.. or you can do without them and have an even less annoying web experience. Listening to music in Linux is easy enough.. xmms is standard with most distros and there are other players with nifty features available for download. Major commercial games are harder to find for Linux but it has a wealth of small free games and many studies have show that this type of game is actually played far more often than those huge 3D games. Games, as are all apps, are becoming more available Linux also.
I like what Red Hat is doing with RHEL and Fedora, but they don't do much for the average home user. I hear that Mandrake has filled this gap quite well, but I haven't looked into it myself.
I think there is potential for a distro that is good for the average home user but I haven't yet seen it. I do a lot of magic when I install Linux for non-techies to use.. mostly in simplifying their desktops to target their needs. I think distros should really work on that. My users average desktop has less than half a dozen icons available to launch apps from their toolbars and they like it that way. I leave other apps available (by clicking a desktop icon for 'More Programs') but I am very targeted with which apps are presented all the time. Also I never show two apps with the same purpose on the toolbars. If they plan to watch movies I put one movie player, if they plan to browse the web I put on browser, etc. Don't overwhelm them but don't block off their choices either. I really liked Gnome 1's 'Favorites' menu and hope it properly makes it's way back into Gnome.. especially if it becomes more like Windows where it automaticlly adds favorites as programs that are ran often.. as well as letting users manually select permanent favorites. IMO that was an excellent feature from a usability point of view. I'd have a recently opened files menu available too but extended to do more sorting by file types.. such that it might open a submenu that provided 'Recent music', and another for 'Recent movies', and another for 'Recent documents'.. but showing only those that have actually had something opened recently in them. Off the top of my head the last desktop feature I'd add would be a wizard that could be popped up easily to reconfigure the desktop.. changing the types of programs the user wants in their quick access menu, making available (or removing) applets they might want, etc. Do you want to listen to music? Y/N Are you interested in seeing the current weather? Y/N Those sort of questions that could configure things without needing to know how to make changes manually.
All that to say you need the right OS for the job. And if it ends up being window$ or MacOS, so be it.... NAH! :)
I don't mind a bit if others use Windows or MacOS but I think you're wrong if you're counting Linux out of the game for the desktop.