.localhost is already reserved for the loopback, per RFC 2606, but I agree with you in general. A small network shouldn't have to have a $10-15/year fee to be compliant if they don't want to use a domain outside their network.
As other posters have mentioned, .lan .home .corp and such are so widely used that ICANN can't even sell them without causing a technical nightmare.
Yes, you're right, RFC 6762 proposes reserving .local for mDNS. I was not aware of this until you brought it up, hence the dangers of using using TLDs not specifically designated for internal use.
Very few as this ruling would reserve .internal for local DNS only and forbid it at the global level. This is ICANN's solution to people picking random .lan .local .internal for internal uses. You'll be able to safely use .internal and it will never resolve to an address outside your network.
This isn't really a Windows vs Linux issue as far as I'm aware. It was a bad driver update made by a third party. I don't see why Linux couldn't suffer from the same kind of issue.
We should dunk on Windows for Windows specific flaws. Like how Windows won't let me reinstall a corrupted Windows Store library file because admins can't be trusted to manage Microsoft components on their own machine.