.localhost is already reserved for the loopback, per RFC 2606, but I agree with you in general. A small network shouldn’t have to have a $10-15/year fee to be compliant if they don’t want to use a domain outside their network.
As other posters have mentioned, .lan .home .corp and such are so widely used that ICANN can’t even sell them without causing a technical nightmare.
This isn’t really a Windows vs Linux issue as far as I’m aware. It was a bad driver update made by a third party. I don’t see why Linux couldn’t suffer from the same kind of issue.
We should dunk on Windows for Windows specific flaws. Like how Windows won’t let me reinstall a corrupted Windows Store library file because admins can’t be trusted to manage Microsoft components on their own machine.