They made a decision to cut the compatibility but also made the 32bit XP mode VM ship with windows for a transition period (unsure if it's still available). I think it feels like a fair compromise (assuming the VM only causes an overhead for those who need it, but having a whole kernel subsystem for legacy apps might mean security or performance issues for all users)
That's interesting. I didn't actually know that, I figured there'd be some kind of shim in place to make it work. Incidentally, this doesn't mean that Wine runs 16-bit Windows programs particularly well. I did a bit of quick research, and it turns out you need to jump through some hoops to run 16-bit on Wine.[1]
I maintain that Windows is always a better choice for running win32 applications, unless you don't have that option. I'll also note that I'm not saying Wine is useless, or anything along those lines. I merely take issue with the idea that it runs win32 applications "better" than a system that's designed to be backwards compatible with win32 applications by the same entity that made win32.