MS made it a requirement that netbooks had to have weak CPU's and RAM limited as not to eat the notebook market share
I thought the CPU choice was more of a battery life thing -- the Atom processors (N500/N550) had much better power consumption profile (at the expense of processing) than a normal x86/AMD processor. The battery life on my ASUS netbook was around 8 to 10 hours, which was great. Having used a netbook for a couple of years it seems like the real hardware compromise was the video, which really slowed things down.
Still, the portability of the netbook was great and worked well for lightweight development (e.g. VIM as opposed to eclipse/VS) at a price a student could afford.