won't ever get you the full web
The problem I have with all these technophiles decrying the iPad's lack of flash is this: are you not the same group that beats down any flash site? FFS, slashdot is the place that puts [PDF WARNING] next to links. If anyone was going to complain about the lack of flash, this is the absolute last group of people I would have expected.
I could get a $500 laptop with a dual-core x86 CPU, run just about every OS under the sun, full multitasking, cheap 'apps', full peripheral support, replaceable battery, etc.
As I said in reply to the OP, the problem is that full PCs are simply too much machine for what many people want to do (watch a show, check facebook, etc). A $99 iPad would be a true game-changer, and I think something along those lines is the next step. At this price point, people (like you) get confused because of the price and say (as you did), 'but... look at the sweet box I could buy for $500, I don't get it!' The point is that my mom and my wife and many like them don't care in the least if they have a sweet box. They care if they can "like" timmy's facebook status.
I use my netbook or laptop while sitting on the sofa all the time, if I want to really "consume media" I fire up my HTPC and put on a movie. If I want to play a game I fire up my 360 or modified Wii.
Your geek factor (Look at me! HTPC! Check me out! Modded Wii!) is what's keeping you from seeing this market. Not everyone uses computers the way you do, and not everyone derives the same satisfaction from setting up their own rad HTPC setup. My wife is perfectly content to watch DVDs, out of a box, on her laptop. I thought that was madness when I first saw it. Fact is, people compute in different ways.