Microsoft’s Windows Live Essentials, a suite of free Internet-centric apps, is about to get a major upgrade in a few weeks, following the company’s announcement of its revamped Hotmail service.

I spent most of 2009 working on a Windows PC, so I got to know and trust these apps. Compared to Office and Outlook, they’re slim and fast. Now, Microsoft is adding a set of key features that each had been missing compared to Google and Apple offerings. Plus a few features Google and Apple haven’t done yet.

Brian Hall, the general manager of Windows Live, gave me a walkthrough of the upcoming upgrade over the phone this afternoon. Here’s what’s included, and what’s new for each app:

  • Windows Live Mail, a lightweight POP/IMAP mail client. The new version has threaded conversations, Gmail-style. It’ll handle Hotmail, of course, but I’ve also used it with Gmail and Apple Mobile Me mail accounts. It displays email without lots of unnecessary, screen-hogging chrome.
  • Windows Live Photo Gallery, which will take on Apple’s iPhoto and Photoshop Elements by adding facial-recognition software and online tagging and sharing. Craziest feature: It lets you merge several photos of the same group of people into one picture that includes everyone’s best face. You can upload photo albums, tag people in them, and share them on Facebook.
  • Windows Live Movie Maker, totally rewritten from the old Windows Movie Maker. To paraphrase Brian Hall, the old version was built for people who downloaded and edited long, long video shoots from an analog videotape camcorder. The new version is designed for people who share short digital clips online. You can make a movie from inside your photo collection. There’s a post-to-YouTube button, of course.
  • Windows Live Writer, a blog-editing tool that works with WordPress,TypePad, LiveJournal, Blogger and other blog platforms.
  • Windows Live Messenger, an AOL Instant Messenger-like client that lets you send photos from Photo Gallery over an instant message.
  • Windows Live Family Safety, which lets you control multiple PCs to restrict your overachieving children from visiting websites or trading messages with people you don’t want them to associate with.
  • Windows Live Sync, which lets you maintain a browser-accessible copy of your content and info in the cloud, while also keeping a master copy on a PC.
  • Bing Bar, which does exactly what you’re thinking, but also works with Firefox as well as with Internet Explorer.

You can spot the direct competition with Google Apps, and with Apple’s iLife and Mobile Me. And in some ways, Windows Live Essentials wins out of the box. It’s free, unlike Apple’s iLife and Mobile Me. It doesn’t run everything in a browser window as Google Apps does, nor does it count on a constant broadband Internet connection. It’s a pretty smart mix of desktop and cloud use that, yes, is designed to make you loyal to Windows, but in a totally different way from the forced dependencies of Internet Explorer circa 1997.

Hall says the Live Essentials apps will be updated often with new features, which is possible because they’re lightweight, downloadable apps that use the cloud rather than packing gigabytes of software onto the PC to do everything standalone. That also means Microsoft can update the cloud part of Live Essentials whenever it needs to, instead of nagging you to install another time-consuming Windows update.

Will these apps make people switch from Mac OS X and Linux? Of course not. But for PC users who use the computer to socialize rather than to produce work, Live Essentials can turn a cheapo netbook into a fairly powerful cloud workstation.