The New York Times

Microsoft Corp moves to defuse potentially explosive privacy issue, saying it would modify feature of its Windows 98 operating system that has been used to create vast data base of personal information about computer users; Microsoft in effect concedes that unique identifying number used by Windows and other Microsoft products has potential to be more invasive than traceable serial number in Intel Corp's new Pentium III computer chip, feature that has privacy advocates up in arms; Microsoft contends that option to collect information was added to software so that company's support employees would be able to help users diagnose problems with their computers; denies company ever intended to use data for marketing purposes (M)