So I noticed last night that this seems to have been relaunched - as far as I can tell it's the same basic machine, but they're now selling it with Windows CE as the OS, still priced at £130. That makes a lot of sense - by Windows CE standards that's a hell of a lot of memory (you can run it reasonably well in 16mb), it's an OS that was designed for netbook-like operations to the extent that there is usually no "shutdown" option on the Start menu, just "suspend", and for most people it's easier to use than Linux.
The big snag, I suspect, is that it probably isn't compatible with any fully featured word processor etc.; CE includes "pocket" versions of Word etc. but they lack a lot of the features of the full program, and I don't think that there are any alternatives - I've never heard of a version of Open Office, for example, though it's possible that one exists. There may not be any alternatives to Internet Explorer as browser, and again the CE version of IE is feature poor.
It's not something I'd want to buy - it's too big to fit in my pocket, which is my main goal with a netbook-style machine, and there are better alternatives for not much more money. But it's a sign that people may be thinking about alternatives to the standard netbook features.