1. It does not have 3G built in
If you want to take this device online you have to hook it up to a WiFi hot spot. I realize 3G is a tremendous power draw on a device (if you surf the web on an iPhone via 802.11 over 3g you should see 50% longer battery life), but when you are talking about an internet device it should be able to get on the internet anywhere.
2. It’s only running on an Atom 1.6ghz processor
You read that right. A device with no operating system, no 3g and running on an atom processor for $499.
Hardware is a tough market to compete in. Palm tried it earlier this year and is seeing their device for under 50% of their original subsidized price. You usually take a loss on the hardware in hopes of selling software for it (see the Amazon Kindle, Sony PlayStation 3, etc).