That's like saying Google shouldn't have worked on Android when iOS was out and it was definitely better than Android (experience wise at least). Google competed with Apple and now they are trying to one-up each other. That's a good thing. No one is really competing with Steam and it doesn't seem that anyone will, so when MS wants to try again, I'm open to it just because I don't like monopolies.
Android exists because Apple were trying to make a power play and cut Google Search (their primary service) out of IOS completely.
That hugely backfired on Apple directly (and MS indirectly), because Googles core business is derived from user data, so they can literally give Android away for free to any handset maker on the sole provision it includes Google services.
Any attempts by MS to 'lock down' Windows are also going to backfire on them just as badly, because there are a lot of vested interests who have absolutely no desire to hand the keys over to Ms as gatekeeper of a walled garden.
SteamOS was a first step precautionary measure, and you're going to see full Origin and UPlay support of SteamOS long before you see W10 exclusive Ea or Ubisoft games.
Steam is not a monopoly, it is the overwhelming popular choice.
There are many alternatives to Steam.
e:
UWP was never intended to remove the need to alter UIs though. Not sure where that idea came from.
No, but you are never going to be exposing things like "mouse sensitivy" options to Xbox One owners - there would need to be a bunch of "hide this PC specific screen" toggles based on which platform the game is running