The point was solid. The original G4 iMac was pretty, but a bad choice for anyone with limited funds. LCDs were still too expensive then, and as a result the iMac was a lot of price for little computer. At several points over the G4 iMac's lifespan, the cheaper eMac was actually the more powerful computer (faster bus, or faster this, or bigger that), and the eMac was alot cheaper. Certainly, when factoring in price as well, one could afford a decked out eMac with maxed out RAM, a huge HD, etc., for the price of a base iMac.
Moreover, the lampshade iMac was innapropriate for schools as it was overpriced and delicate. The eMac filled the role of a cheap, sturdy computer for schools far better than any other mac.
With the arrival of the new G5 iMacs, they have fullfilled their originial promise. They are much more powerful than the eMacs and the additional cost delivers more than just an LCD and better aesthetics. Still, they are questionable for schools, and too expensive for budget customers. The mini fills out the budget role well enough (although the eMac is still more powerful than the mini), but it's potentially a little stealable for schools. That can be overcome with custom-built locks and casings, but the eMac is still good for security. It's hard to abscond with a 50lbs computer.
I'd vote for abandoning the eMac and making a new eMac based on the G5 iMac. Make it a little bigger and sturdier (allowing the use of cheaper parts) and less powerful, and sell it at the eMac price point for schools and education customers.