I’m a little fuzzy on what exactly MinWin really is, but from what I’ve read it seems to be the nucleus around which the Windows UI, APIs, and everything else revolve. It’s not exactly the kernel because the kernel itself is not contained entirely within MinWin. Think of MinWin as the indivisible Windows: no dependencies, bootable, application-ready, and altogether about 25MB. That Windows 7 ASCII thing you’ve seen around? MinWin.
What role it might play in Windows 7 is as yet unknown; after all 7, runs on the Vista kernel and although streamlining is a selling point of the new OS, nothing has been said about any ultimate stripped-down mode or what have you.
Here’s my fantasy: remember when you could restart into DOS mode back in 95? What if you could restart into a mega-minimal mode that essentially runs a single app, with filesystem and device access but only as many bells and whistles as the application requires. Every one of your 256 cores dedicated to one thing, be it Crysis or HD video editing. I’m sure that’s not it, and I’m probably missing the point of MinWin, but wouldn’t that be awesome?!