I would say Apple had been doing a fair amount of it prior to Microsoft, if you looked at the way they carefully patched the Monitor II ROM in later models. This is something that Atari didn't get at first when they first revised the OS in the 1200XL and shifted entire sections of code, before reverting major sections back to match the original OS.

Problem is, there were always programs that abused the OS so much that it would have been impractical to accommodate them, since bundling extra ROMs is costly. The worst case I know of is a program that used an entire section of the OS ROM as an XOR encryption key for sectors on disk.

As for Atari vs. C64, I love the Atari but it needed an update to the custom chips to compete with the C64 and other newer systems. But instead, Atari was looking at adding a 300 baud modem and a speech synthesizer to the computer instead.