Anyone who understands that the 770 is a handheld remote X terminal and who understands the power of the 'X Server - X Client Application' paradigm is never going to agree that the 770 is a limited use device. On the contrary, it's the first mobile device ever manufactured for the mass market that was NOT a limited use device. The magic of the 770 is that when used as an X terminal it is thinner than a thin client and its GUI can empower the user simultaneously to multiple remote apps and services running on remote computers and remote supercomputing clusters. A 770 user using X has access to far more CPU power and storage than does a user of any XP machine of any size.
Reality is far too complex for this to be true. The 770 itself is evidence of that. When miniaturization involves integration of multiple discrete hardware components the price of the integrated component typically is less than the price of the formerly discrete components. When current is reduced, the need for (and cost of) heat dissipation components is reduced, or eliminated. When BlueTooth or Wireless USB are added, the need for cables is eliminated. When the touchscreen firmware is moved into the CPU the need for a discrete controller is eliminated. When miniaturization makes a product more in demand the cost of manufacturing each unit decreases.

There are many problems with building small XP machines that work well, any many of these are the same problems that are encountered with building big XP machines that work well.