Microsoft is correct on a least one claim, and that's that the browser deletion feature is disabled with the Chrome Plug-in. However, I really don't see that as a being a big deal. I am sure that Google can fix that with a patch.
Google claims that the plug-in is needed if IE users intend to use Google Wave because of the performance requirements. Requirements that IE just don't meet. Wave is Google's new tool for communication and collaboration for the Web.
Security is a major concern, but let's not be fooled by smoke and mirrors. Adding a plug-in like Chrome Frame to IE is like adding gasoline to fire. I have not heard anything about the code base, but I am sure that it is built on a high level of complexity and we would be adding another layer of complexity to IE. I am not going to recommend that any of my customers download the plug-in and use it in production. I do encourage them to play with it in a sandbox to test its functionality. I am taking a wait-and-see position until I see what issues are uncovered, if any. We should know rather quickly if there are any major problems with the plug-in running under IE. As of this writing, I see no other concerns outside the claims that Microsoft is raising. All of this comes on the heels of Chrome marking its one-year anniversary.
I think the real issue here is that Microsoft is just angry because it has another browser to contend with and now Google is literally plugging into one of its flagship products. Microsoft typically deals with competitors by either buying them, taking them to court, or trashing them in the press. But Google is obviously a special case.
What I found amusing about this whole thing is that Microsoft claims that it knows what users want in a browser. After all, Microsoft has been doing this forever. It claims that what users want is security, privacy and reliability. If this is the case, I think everyone should use Firefox.