Only illegal copies cost $5. You could say also that they cost nothing if I download them from pirate bay. And if you're from Brazil too, you know legal copies of PS2 games here cost a lot more than that. Zeebo is going after a different market, offering legal copies costing $12.
But IMHO, I don't think the poor kids here are looking for the type of games this console is going to have (like Quake, Sonic, etc). I see this working for parents buying this for young kids, but in general, once kids grow up to the age of 12-14, they will ask for newer consoles, newer games.
The problem is that there is no isolated place in the world today. Wanting the latest is not a luxury that only 1st world countries have anymore. Information travels very fast nowadays, and products appear here almost at the same time they appear in USA or Europe. Poor kids on the street here in Brazil may not have anything to eat, but they surely know that a PS3 exists, they see a Wii or Xbox360 demos on stores as they pass by.
So, the fact is that that poor kids/parents will surely prefer to buy a not so old PS2 in the black market free of taxes for $150 or less than buying a legal version of Zeebo with 15 year old games for about the same price.
So, yes, I see this console working for a specific market, but I don't see it as any revolution like being the most popular console ever.