Could I personally live without Microsoft (as in my usage of MS products)... yes, for the most part. The only copies of any MS products I have on my system are for reading things sent to me from others or viewing sites that don't use W3C standard code.
Could the world in large live without MS... yes. If everything MS vanished today, we would all be in a little better place (though not as good as if they had vanished five years ago). We would see things like OS/2 Warp make a big come back in the personal computing market. And the web would be a much better place (considering Windows minority status as a web server, it still accounted for a majority of the problems on the internet... IIS is an unparalleled security failure that hackers just can't seem to get enough of). I would hope in this better world, formats would become unproprietary standards so that you would have any number of apps that could read a given type of document (sorta like jpg, gif, and tiff, or even to some degree Rich Text Format). Microsoft's primary control over the computer world is Office, and I have felt that more than any other possible punishment for Microsoft, making the Office documents format an open source format that MS could not vary from and than anyone could use for their products would end Microsoft's rain of terror. As for FrontPage, I have never quite understood why anyone would use it to make a web page other than the fact that it is bundled with Office. Maybe without FrontPage on the market Adobe would bring back PageMill.
As for companies that use MS products, it is often been the path of least resistance rather than picking the best solution. Microsoft's monopoly means that they can put out a mediocre enterprise solution, and people buy it without doing any research to see if there could be a better solution for their needs. I can't think of anything MS does that is not replaceable, often with added benefits.
Think about this, how many people with no computer experience entered the IT/IS world by taking MCSE courses? Are those people even aware of alternatives? Would they even try to give their future employers non-Microsoft solutions? Ask the average IT person about anything else other than Microsoft products and watch the reaction... which is usually distaste if MS has a competing product or they are completely oblivious to an alternative's existence (I tried this with Solaris and StarOffice, it was funny).
The point is, we are still at a point where the shadow of Microsoft has not killed off all the other alternatives that are out there.