Is it evil to introduce terms and conditions that restrict how you expect your users to use your product? No, it's probably more hypocritical than evil; I don't think my parents telling me not to smoke while they struggled with addiction was evil, but it sure didn't model the best behaviour.
Is it evil to lobby government to curtail the freedoms of individuals to protect your business model? Yeah, probably; in most cases I believe that reducing consenting adults freedoms is usually a pretty evil act.
Microsoft is guilty of both, but I prefer to save Evil to describe actions that actively cause harm, either physically, mentally, emotionally, or in terms of harming the freedoms that people enjoy, especially if that choice to cause harm is economically motivated.
I'm not advocating on behalf of Bill Gates or Microsoft, just on clear terminology so that we can focus on actual evil behaviour versus consenting adults entering into a valid contract for mutual benefit.
I may have been too focused on the "false dichotomy" part and forgotten that you were talking about old Microsoft and not current Microsoft. I don't know enough about old Microsoft to say whether they were "evil" all along, so I won't comment on that part. I do agree with "don't hate the player, hate the game" in general though.