I’d say that the ‘modern’ era of Microsoft Enshittification started with IE4 as well as Windows 98. The Channel bar put ads on the Windows 95 & 98 desktops. It was easily disabled, but even that far back, Microsoft was starting to work on making their stuff suck just that much more.
Next was Windows ME blocking DOS access, while still running on DOS, making the OS a bit … unstable, followed by your point of Software Activation in XP.