MSDOS.SYS was also at the center of one of the weirdest bugs or misfeatures found in Windows 95, witnessed personally by yours truly on a number of occasions:
The very earliest retail releases of Win95 (4.00.950 and 4.00.950a) had a feature that permitted the user to boot the machine into a previously installed MS-DOS system, by performing some kind of switcheroo with the required system files (COMMAND.COM, IO.SYS, MSDOS.SYS and maybe some others), which the initial Windows installation preserved under different names. A kludge by any standards, but it worked. That was, until OSR2 (version 4.00.950b) came along:
The first time the user selected the "Previous version of MS-DOS" boot menu item, Windows would do its little Chinese fire drill with the old DOS files and DOS 6.22, or whatever, would be there, working just fine. But the next time the user tried to start Windows normally, the machine would boot to nothing but a blinking cursor, and no explanation.
As I recall, after a few repetitions of this (interspersed with some Zen contemplation of the black screen) I figured out that somehow, in the switch between the Windows and DOS system files, the original MSDOS.SYS file was being trashed. I think I finally managed to fix it by borrowing a copy from someone else's Win95 machine.
Now, since I was at the time an avid gamer and demo watcher, I used MS-DOS mode more often than most people might, so I switched to System Commander for true dual-booting between Windows and DOS. Naturally, this all makes me wonder whether Microsoft somehow planted this "feature" as a not-so-subtle attempt to nudge Windows users permanently away from good old DOS.
So... shiftless incompetence, or planned obsolescence? Only Microsoft knows for sure.
I suppose it's also possible that my computer hardware was on drugs, but why would it have worked fine in Win95a? Who the hell knows...