"What was it?? Linux in 8MB? or was that 4.... Worked quite well in 1998 - including X window and software development, with a mail server and DNS even."
Not 4. I ran Linux on a 4MB system, and X + xterm was enough to soak it. To be honest, 8MB was pretty minimal once you were using X. (X was known even in the 1980s for it's "extreme" hardware requirement of needing 8-16MB of RAM to run decently.)
Anyway... if I were Microsoft, I would make the MSI installer service an installable/deinstallable package. You install MSI, install whatever, then deinstall MSI (so you don't have to worry about potential bloat and security implications of having an installer present.) I really can't understand not having some kind of local command prompt either. I would bet the reason there is no GUI at all (even a screen with a command prompt) is that they found a massive wad of interdependent spaghetti code, have no possible chance to seperate it, and to get the size down they had to rip out the whole enchilada.
It'll be interesting to see if they get this to some kind of reasonably useable state, it'll certainly be better from a security standpoint than the status quo.