All of the "how can they do this?" comments tell you something about how well the original Modbook was marketed: not nearly well enough. Conceptually, legally, there's nothing new here.
First, this is not "what the iPad should have been". Based on its sales, it's obvious the iPad was just about exactly "what the iPad should have been".
Second, there is most definitely a use for something like this. I'm a cartoonist, and work almost entirely digitally these days. I currently use two machines: a MacBook with a Wacom Intuos tablet for input, and a Lenovo Tablet PC convertible (the screen pivots and folds back to be used like a slate). Neither of them is ideal: with the MacBook/Intuos I can't use the stylus directly on the screen, and with the Lenovo the keyboard/mouse assembly adds to the bulk... and it doesn't run OS X. The lack of a keyboard on this is a big "so what?", when I'm drawing in Manga Studio, I rarely have any reason to touch the keyboard. I have a desktop computer for uses that involve typing.
The iPad is ideally suited for media consumers, and suitable enough for those who dabble in media creation. For professional media creators, it isn't that great... but this is. Whether the price will be affordable, and whether it'll reach a large enough market to be profitable, remains to be seen. This still isn't perfect (bigger and lighter would be nice) but the Modbook Pro is almost exactly what I want for drawing.