I know the MS is looking at replacing the file system with the SQL engine in Longhorn so they must have solved the issue.
They're not replacing NTFS with a database. They're implementing a database layer (WinFS) on top of NTFS. It's not entirely clear what they're doing, but apparently they index a bunch of metadata in order to help manage files.
On a related note, this has apparently been pushed back to a post-Longhorn release so that they can keep Longhorn on track for 2006. That, at least, is what the tech media is reporting.
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