No stylus, why use a stylus when you have a UI designed for finger touches? It could be used for text input, but this still isn't very advanced.
Because fingers are fat, and sometimes you want to do something that requires a finer touch. Like draw something with narrow lines instead of big bulging lines.
I'd look for this to be [...] a competitor to netbooks, without the clunky keyboards, and the horrible XP interface, and a competitor to kindle, without the clunky interface.
Everything I mentioned I can pretty much do on a netbook, and without the horrible XP interface. That's part of how I built my list of tasks. They're what I do on my current tablet (Samsung Q1 Ultra running Ubuntu-UMPC), and what I plan to do on the Dell netbook I just bought.
It would be nice to have an Apple product to do those things on, for the extra polish (not just visual polish, but usability polish) that Apple and OS X bring to the table, but ultimately the need to do what I do rules out over whether or not Apple will sell me that product. I wont sink to the depths of an XP machine, but I will certainly chose an Ubuntu machine over an Apple machine, if Apple isn't going to sell a product that does what I _need_.
I'll easily pick a Touchbook (or EeePC T91 or T101; or CTL 2Go tablet) with Ubuntu over an Apple Media Pad, if the Media Pad doesn't have the list of capabilities I said. And, at that point, it'll be my fifth* Linux device in 2.5 years (when I picked a Nokia N800 over an iPod Touch, and never regretted that decision), and will probably be my point of never looking back.
(* the other 4 linux devices being Nokia N800, Nokia N810, Samsung Q1 Ultra, and a Dell Vostro A90; though technically my phone (G1) is also a linux box)