I agree with Murray - get rid of Windoze and this becomes much more attractive.

This machine would blaze if it were running DSL (Damn Small Linux), or Vector, or some other distro designed for minimum hardware.

I can think of a lot of ways this could be made to work, e.g., load the OS into RAM and suspend the HDD except for data reads (hopefully there is some degree of caching built in), cache data writes as much as possible, keep the screen illumination low, all could contribute to making this a really useful lil device for us first-adopters.