Check out the Microsoft Expression Blend product to "create engaging web-connected experiences for Windows". Scoble even just blogged about it, sort of. Check out the features on the Blend page (just hover over each one) and you'll see how cool it is.
Now if I only had time to play around with it and develop something!
I would like to see someone use Blend to build a really cool Windows Live (or Vista) Gadget with the Windows Live Contacts Conrol.