At the time I remember reading that was kind of the issue. I thought the article said something like "when Gates saw the Xerox machine, the display had no overlapping windows". So M/S cloned it as he saw it.
Once M/S W1.0 was developed he saw the demo again and was surprised the windows overlapped. So they rushed 2.0 to fix it.
But funny, with all people on Linux using tiling window managers these days, it seems Windows 1.0 was ahead of its time :)