It's an extension of a PC, not a PC
Admitedly, there are some people, maybe 1-2% of the market, with low enough expectations of PC performance and low enough needs, and who are willing to attempt to function in practically Win98 resolutions on a 9-10" screen, or those who are simply willing to accept that because they can't afford the alternative.
However, in reality, the Netbook is not something people buy as a primary PC (many do, then return it within 14 days having learned better). A Netbook is a light, cheap, simple machine good enough to bring to aclass and take notes, to surf in a coffee shop, or to bring on a road trip and run a corporate presentation (as long as you don;t need to support HD projection). It's something you do some work on, then sync files back to a real PC or notebook later. It;s a slightly more usable e-mail platform than an iPhone or Blackberry if you have to type a lot of lengthy replies though the form factor is certainly less protable.
As a primary machine, most colleges won't even accept it (won't run XP pro due to license limits, so it can't join a domain, thus can't be part of the secure campus network; same goes for companies). A lot of people showing up to USC this year got that as a nast surprise (after they failed to read the colleges new PC requirements page before buying a machine). You can't even get on the campus wifi network unless the machine has a domain account, so in class, you can't iunteract with the professor's presentation, automatically download notes, access their podcasts, or get/turn in assignemnts. A lot of kids bought these things mid summer, and are now stuck with them, and with buying a $1200 minimum priced machine (campus requirements for even basic students are a bit higher than ordinary jJoe, especially since the campus expects you to use that machine for 3-4 years, and still keep up with security requirements, and not also be telling the professor "give it just 2 more minutes, it;s almost booted up!")
Personally, I'm holding out. i have an iPhone (2 in the family). I'm also looking hard at the Eee keyboard, eagerly waiting to hear the price is under $400 ($300 and I'll but it on day 1). I don't mind the extra 2 lbs of a 15" Macbook compared to a netbook, especially since I don't have to figure out how to manage files across multiple PCs without the use of an integrated sync app, which is what netbooks REALLY need (live mesh.com anyone?) I also don't think 3" less in size makes the slightest difference in carying a bag or not. The BAG is what's cumbersome, and 10" sized bags don't hold paper which is still quite necessary fore meetings, and the power brick is the same size, also those netbooks need external CD drives which actually can make taking them on trips worse, making the bag thicker or bulgy.
I think sliding a 9-10" Mac tablet in a bag, if they're $500 and can support some slightly more advanced software than an iPhone and a bit more multitasking, would be something I'd greatly considder. A Netbook? No, can't find a business case for them that I wouldn't easily exchan ge a 13-15 full notebook for. It's simply not that big of a difference. And yea, great, it's $299 with a contract or $500 without one, but then you have to buy a SECOND copy of office, more antivirus, probably a few other apps, and manage patching 2 machines and dealing with file versioning, so where's the savings? $500 for netbook, $300 for office, $100 in other misc software/accessories, $50 for netbook sized bag; for the differnece I'd have gotten a rediculously powerful 15" machine that I'd be able to keep playing cutting edge games on for 3-4 years, or expect to have a 5-6 year lifespan... It's not cheaper to have a netbook unless it IS your only machine, and good luck with that.