I think "net appliance" isn't necessarily the right path, but there should be something below "full powered" PCs that offers the basics all users need (web, email, office apps) on a solid state system without the moving parts of a HDD, etc. Kind of like a PDA on steroids... The idea is to create a simple appliance that doesn't have the complexity inherent in modern PCs. It's not a solution for everyone, just another option. Price would have to be low though, probably well under $500 for a clamshell/laptop form factor.
Chris
What with Asus opening things up with the Eee, others have jumped in. Acer and Dell have announced laptops in that form factor today, and the MSI Wind is looking pretty nice. You'd want something bigger for what you are talking about though, bigger keyboard.
I'm more interested in the Asus Ebox - very small desktop without an optical drive, with an Atom processor, although I'm beginning to think that Atom might be a lot of hype and the new Via Nano looks just as interesting.
Not sure about other distros, but you can stick Ubuntu on a PS3 and stick in a bigger hard drive. I've thought for a while that it would make an excellent all round system if I didn't already have it hooked up to the same 24" monitor as my Ubuntu box is linked to. Access to internet, OpenOffice, games and blu-ray dvds in one quiet and attractive box.