I've decided to bite the bullet and write a gadget for the Vista sidebar. If I can figure out how I'm hoping it'll do some funky MOM monitoring stuff so you can see the status of all your servers with pretty lights etc.
I guess some of the limiting factors in moving on from JS (talking beyond the sidebar now) have been cross-browser compatability (don't laugh), and appealing to a broad developer base. If you want your application to be accessible by everyone then you need to appeal to the lowest common-denominator technology. Tools like Atlas and WPF/E help mitigate these things, but I can't help feeling we need to take a step back and work out the best way for rich web clients to work, now that we're pushing so far beyond the static pages of ten years ago.
Update: Okay, I'm not the only one to have asked this, looks like we might get WPF support in the sidebar eventually :-)