...I have no issue with infected PCs being blocked by the ISP (after their own scanning, or someone alerting them) and the owner being made to cover all costs incurred (including clean-up - they can take it to a certified engineer if needs be). People need to wise-up to their on-line responsibilities.
But for MS to propose such measures is a bit beyond the pale. If their OS was not SO EASY to infect and subvert, we would not have these issues. *nixes (and I include OS X) are not immune, but they are a shit-load harder to subvert with the tricks that work on Windows. They are also a heterogeneous and compatible environment, so it would be extremely hard for one piece of malware to infect more than a subset of machines.
Often it is not the OS that is actually infected, but some application (e.g. MS Office) that is bent to the will of the hacker. If you are lucky, MS will update this on a random Tuesday. But what if it was a non-MS app? You've got little help unless you actively seek our the patch/new version.
The update mechanism on any modern Linux distro (I don't know about OS X, sorry) is vastly superior than the one on Windows; it takes care not only of the OS and ancillary systems, but also all applications that have been installed via the certified repositories (or whatever your particular brand on Linux happens to call them). No need to go looking, your system will check for updates once a day (or whatever you set it to).
One side effect is that you may get a batch of updates every day. This is a "Good Thing"(tm) as you get the fix as soon as it is ready and don't have to wait for that special Tuesday. Reboots are rare due to how *nix deals with files and it is all over in a few mouse clicks (or a few terminal commands if you prefer). And yes, you can modify how all this works for the corporate environment).
If the world moved to Linux (or OS X, BSD, Haiku...) tomorrow, viruses, rootkits, trojans etc would not vanish, but they would become much, much harder to forge given the reasons above. The only losers would be Symantec et al.
So, by all means, block infected machines, but ask yourself why such measures should be necessary. If the internet is the "information super highway", then Windows PCs are unfit for the road and fail their MOT (or TUV or...)