Personally, I love the new Express products! I feel, this is something special and new in the Microsoft world. Sorry 'bout this, but in my opinion, SharpDevelop is no alternative compared to the Express editions. And WebMatrix isn't either.
Because of this, here are my personal reasons, why Microsoft has to continue to give away the Express editions for free:
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We need a free, but really powerful IDE! Imagine, you're an enthusiast or student: You would mind paying for a development environment you'd use in your spare time, wouldn't you?
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Microsoft wants to sell Windows licenses, because this is their business. With a free and powerful IDE, developers may develop more and better applications. The more and better applications (possible some of them for free, too) - the more reasons for buying a license (okay, this is some sort of idealistic... ;).
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If you're looking at Java, they offer lots of free and powerful IDE's: Eclipse, NetBeans, etc. .NET's market share is way behind Java's, so we need to compete with them.
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A hobbyist won't be interested in some sort of a special "development experience", but in an affordable (free) solution which allows him to do the tasks he wants to do without annoying limitations (missing IntelliSense, missing Web-Features, etc.)
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.NET is way behind Java in terms of market share - we need to offer better tools for lower prices to the students and the ones in the companies which decide, what framework (Java or .NET) to use. And if this wasn't possible, we need to have the better tools at the same price.
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ASP.NET is way behind PHP in terms of market share - we need to give the hobbyists a real alternative - by offering better tools for free.
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ASP.NET-development without VS.NET was frustrating - give the developer a VS.NET for free (or an Express edition of something) and they will use it! More users - more marketshare!
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The community wants free but powerful tools. They won't pay for their tools. That's a fact.
For professionals, there won't be an alternative to VS.NET (except C#Builder or similar products)- so keep the Express-editions free, Bill! This is exactly what the community wants and what we need.
Just one addition: It's not about this horrible "everything must be free"-stuff! I do pay for my development environment, I do pay for my virus scanner, I do pay for my software, I do pay for my music. Because I think it is worth it. But here I'm speaking about hobbyists, enthusiasts and students - this is the audience, which isn't reachable when you charge it
Speaking a German a MVP for ASP.NET, we are actually in some sort of war with the PHP and Java-community. And without any help by Microsoft (which should include a free but powerful IDE) we don't have a change to play equal or even win. This is a fact, too.