But who will it make look idiotic? Microsoft or the papers? So many people are used to seeing "Microsoft" somewhere on their machines it generally doesn't register anymore unless it is an actual MS product (Microsoft Money, XP, Zune....er, gelatin molds....whatever).

By each paper having it's own branding and it's own container, most people will probably just associate each individually with the paper using it instead of as a collective whole under the Microsoft umbrella. Using DRM as an example, more people are peeved with the companies using it to restrict their products than are with the company supplying the DRM itself.