The "Vista" moniker may not have been coined until then, but development was started a lot earlier, back when the beta versions were simply known as Longhorn (much like beta versions of XP were called Whistler). IIRC those codenames were eventually used for the server OS, but originally it applied to the desktop development too.
XP running for so long is one of the biggest headaches MS suffer no doubt. In some respects even if we had jumped straight to Windows 7 a lot of people just would not want to give up what they know. I run a business, spend a lot of software, guess what? We will be with XP for a long while yet!
Even though I'm an avid computer enthusiast etc when it comes to business there is nothing better than knowing things are stable and well proven.
The biggest problem (in the eyes of the OS user majority) is that Vista has not done anything better than XP. Not for the average computer user.
remember the huge hype surrounding win95? Thats what MS need again. Although I'm really not sure it will ever happen for any software again quite like that