Bet they're not paying full price
I bet they're not paying full OEM price for XP. Microsoft must have shat their pants seeing a neat small footprint laptop with office apps on it for that price.
Worse still when they couldn't diss it as a toy as it worked well and sold well. Then things were getting even worse, competitors were copying it, and planning cheap home PCs!
I'm guessing if you dig into it, you'll find MS may even be paying Asus for XP on that box in some complicated subsidy deal, just to undermine the market for all those linux competitors coming out.