Anyone know whether MS is working on an update to enable virtual desktops? I know there are 3rd party software to do this, but I'd rather have it built-in to Windows.

Not sure I'm clear on what you are talking about. If you are referring to having a "VirtualBox" server located within the OS itself... no. there are no plans for this in the near future that I know of. Vista can barely handle it's own processing consumption, let alone that of another OS at the same time. Let me know if I understood your question properly.

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Life is too short to take the LONG WAY...

I mean like how Mac OS X has different desktops ... So I can switch between different desktops of Vista.

Assuming you have Vista Premium or above i think you meen a 3D Desktop??
If this is the case you need to enable Windows Aero first of all by right clicking the Desktp and selecting Personalize then it's in there somewhere.
To Flip through the various applications you are then running you toggle the Start and Tab keys on your keyboard at the same time then keeping the Start key pressed and selecting the required application using the Tab key.

Hope this helps.

Please note, not all graphics cards support Windows Aero.

OK people have gotta read my posts more. I DON'T MEAN Flip 3D! I have Ultimate and a GeForce 9500M GS, so I can use Flip 3D with Windows + Tab, but I want virtual desktops like Mac OS X, where you can have multiple desktops.

I haven't heard if anythings in the pipeline apart from the usual 3rd party software.

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i know what you mean man... spaces on mac os is really something... here's a cool piece of software: Otaku Software - Products > DeskSpace: 3D Virtual Desktop but you need to buy this baby... don't understand why in the world M$ missed out such a feature in Vista... i mean this is a necessity... hope they'll put something like this in Win7