It seems that WinFS as a new file system for Windows is dead. This is what Quentin Clark says on a Microsoft blog:

Since WinFS is no longer being delivered as a standalone software component, people will wonder what that means with respect to the Windows platform. Just as Vista pushed forward on many aspects of the search and organize themes of the Longhorn WinFS effort, Windows will continue to adopt work as it’s ready.

I never understood why WinFS caused so much stir. It probably came from the overestimation of search technologies these days. Everyone is hypnotized by the success of Google. Many think what worked for the Web should work on the desktop too. But how often did you search for a file on your hard disk last week, in comparison to the number of times you searched on the Web?