Why competition with Microsoft can be  unhealthy for OSS movement ?

It depends on the dose. Like commercial involvement it's a mixed blessing and I will argue below that it might increase the "cult of personality" danger.

As I noted in one of my papers the competition with Microsoft as well as anti Microsoft stance serves as an important organizing force for the movement, but at the same time there are dangers. First of all to compete with Microsoft in all area (including featurewise competition) is a self-defeating strategy -- you need to dramatically increase both the size of the products and the size of the community. But the pool of talented software developers is very limited and a large developers community inhibits innovation to the extent that a given project may stagnate. As Jamie Zawinski put it:

"There exist counterexamples to this, but in general, great things are accomplished by small groups of people who are driven, who have unity of purpose. The more people involved, the slower and stupider their union is."

Moreover loss of focus leads to loss of architectural integrity. Linux for Intel is one thing. Linux for ten different CPUs is quite another, much more complex project. We need to fight "for simplicity", not "against Microsoft".  Open source in general and Linux in particular has a lot of advantages (as I noted above, especially in education, developing countries and for startups) that need to be developed, but it's not necessary for Linux in general and Linux applications in particular to match "feature by feature" best commercial offerings (and this way match them in complexity too) or to be faster then commercial offerings. In many respects it's just a different animal and the value of simplicity often match or exceed the value of featurism. That means that open source version of MS Word is not necessary a good thing. While all-in-all still very good, the latest versions of MS Word are designed for the average user. Why not use TeX or a good XML editor if you are a power user ?  Actually MS Word has at least one serious limitation for the power users -- there is no ability to view the markup of the document is a raw form as in WordPerfect. Also macro capabilities are clumsy and not very well integrated... 

But there is one more problem with speed and open source development. I feel that if speed is really important then authoritarian methods have distinct advantages over democratic methods. "Speed kills" and the first victim is democracy (first noted by Frederick Brooks in his analysis of OS/360 development). A purely authoritarian style will lead to creation of project elite and strict hierarchy (benevolent dictatorship as it is sometimes called in Linux). But Linus Torvalds' love affair with the Linux kernel is now in its ten year and he firmly positioned himself as an irreplaceable coordinator of kernel development. How long can he run the race and what happens if he will be driven over by a track ?

I think that any attempt to speed up an existing OSS project beyond certain limits could lead to unforeseen consequences including dangerous in a long run authoritarian changes in the project social structure. Thus head to head competition with Microsoft on all spectrum of hardware available (that means both in server and desktop space as promoted by Raymondism) is a dangerous threat to the open source movement as a whole. In order to compete with an authoritarian organization like Microsoft the speed of delivery is the matter of survival and that means the creation of authoritarian organization of its own.