The display is color. In the lowest brightness setting, it reverts to black
and white and remains mostly visible in sunlight (it's visible in sunlight at
all brightness settings, but the colors don't come out well so there's little
point in wasting battery and not turning the brightness all the way down).
You're right about the keyboard and general lack of resources. I purchased
one for myself and am finding it very difficult but possible to touch type, but
I do enjoy the placement of the Control key (to the left of the A; there is no
caps-lock). I had to do quite a bit of work to get everything set up with
"normal" window manager, xterm with readable fonts, browser, etc (note that the
default sugar interface includes all of these, just in a different form than
any Linux distro); I'm planning on using it as a conveniently portable
development (often via ssh) workstation. (I've heard similar complaints about
the Asus EeePC keyboard, but that is not exactly built for children so
presumably its keyboard is slightly larger.)
I've seen many Give-One-Get-One participants say they purchased it as a gift
for their own child or niece. This is the obvious market for the OLPC in its
current form were it to be sold in retail stores. The question is, does it
make a good laptop for children in wealthy areas who probably already have
access to a computer and Internet? It certainly includes a lot of neat
software, but is somewhat sluggish. I don't know any young chilren, and I've
no idea if the laptop makes a good gift or not.