Microsoft really does use Team Foundation Server internally..
Wanna see how?
Then go check out this TechNet webcast in July: How Microsoft IT Manages a Visual Studio 2005 Team Foundation Server Infrastructure. It looks to be a really cool discussion on how TFS was adopted by Microsoft IT, the problems they encountered, and how they overcame them. Thanks to the Microsoft UK Developer Tools Team for providing a post to the above.
I had the opportunity to talk to a gentleman about this very topic while I was at Tech Ed last week. He had a booth set up in the TLC with basically the above title. He was actually VPNed into Microsoft, and could show you real-time what the team project setups were like. It was all very cool. He was handing out CDs with lots of Powerpoint and other information on them regarding Microsoft IT and TFS. Very cool, interesting stuff. Its one thing to have installed TFS and used it some, but it is quite something else to see how a company the size of Microsoft uses it.