It's not all or nothing. Microsoft will not be able to sell _gaming_ services in the UK. The other things will be fine.

Given time and effort it's possible. If such a move were to be done I'm sure every democratic country would be most displeased. Which would in turn, warrant them all the will in the world to completly reform their dependencies on Microsoft.

I don't see any reason as to why this couldn't happen, the EU has already demonstrated its concerns on relying too much in certain companies, and they don't have as much of a flagrant issue as the aforementioned agressive move would imply.