I have resisted "My Documents" and "Program Files" for many years, and the main reason is user choice: if we all "give in" to having no user choice, there'll be no incentive for Microsoft to keep it in future versions of Windows.

[b]My Documents[/b]
Proponents of the "My Documents" system say that it's good because it gives each user a standardised home directory and makes it easy for multiple users to have multiple accounts on one system with their own "My Documents" directories.

If this was all that it amounted to, I wouldn't have a problem with it. It would be no different to using C:/ as a home directory except that the location is standardised and set up for multiple users. But unfortunately, it's also come at the expense of users who want to set up files and folders how they like within their home directories. Microsoft has set up a standardised pattern, e.g. "Pictures", "Music" and "Videos", and applications religiously default to them. In addition applications increasingly install various things into subdirectories of "My Documents" which you can't choose- in the past you could usually define where they should be installed.

In addition there's a trend towards all programs defaulting to using My Documents instead of "the last place you saved to", at least every time you restart the computer. This is a flaw as far as I'm concerned, because it encourages users to bung everything into My Documents instead of subdirectories within My Documents- it's not much better than bunging everything in C:/. Some default to specific subdirectories, but those contain the problem described earlier- users don't get a choice as to what subdirectories they go into.

[b]Program Files[/b]
Microsoft's idea behind Program Files appears to be to move towards a standardised system where all of your program data is stored in Program Files and can't be modified in any way, and all editable files go into My Documents. It's argued as a "security feature"- I guess this refers to the fact that multiple users can log on without risk of one of them deleting program data that the others rely upon.
However, many of us don't have multiple users on one machine, or can trust other users not to modify/delete our program data, in which case this security provision isn't necessary. My personal home computers are usually used only be myself.
On Vista and Windows 7, it is extremely problematic with many computer games that require modification of the game's installation directory for mods and the like. For example stories are rife about how on Vista and Windows 7, you can only make/install mods for most games if you install them outside of C:/Program Files or remove User Account Control altogether (thereby defeating the point of the system).
Again, it's also enforcing a specific file structure and removing choice from the user. What about those who liked the system of having games install to C:/Games and general tools to C:/Program Files? What about those who want to install to drive D instead of drive C?

I also note that installers, while providing the option to change the installation directory away from the default, are increasingly hiding that option, e.g. tucking it away in "Custom Install" or even a small print checkbox. One problem is that the default directories are often quite hard to locate, e.g. instead of defaulting to "C:/Program Files/Program" they default to the likes of "C:/Program Files/Company Name/Publisher Name/Applications/Games/Program". They call it "putting all programs in one place for ease", but the way it is at the moment, it's not much better from that perspective than bunging all programs in C:/. Although Microsoft probably assumes you won't ever need to find where the programs are installed...

[b]Useability Testing for Newbies[/b]
One common justification for the "removing user control" is that users need to be protected from themselves because computers have to be set up so that "Granny" can use them intuitively. But this goes back to the "black and white priorities" problem- newbies are considered more important than experienced users so experienced users get completely ignored, instead of being assigned a lesser weight.

It wouldn't be too difficult to simply make the factory defaults easier to modify without them keep resetting themselves, or even provide two installation options: "Standard Install" and "Advanced/Experienced User Install" where the former applies default settings suitable for newbies and the latter for experienced users.