I see a very small market for such a device.
Yeah, but you know how that goes. Whatever you or I want, isn't necessarily anywhere near what others want !
Why would I want something like that around the house when most of the stuff I want off the internet needs to be on a PC (files, games, etc)?
Oh gosh, I need one myself, even though my laptop is on in my home office 24/7. Lots of times I'm in the living room or bedroom or porch or backyard, and just want to browse or look up something. A handheld device that gives you internet and TV and the ability to check your main home computer files would be very nice.
Let's assume you want it as a device to be used when you're out of the house since you'll probably just use your laptop at the house anyway. Ok, why would I carry this device AND a cell phone?
Well, considering the scenario I just gave, I would use a different device outside the house area. But let's say you did take it with you...
Possibly you have a purse to carry it in. Or it's in a briefcase, or whatever. The thing is, tablets give you much larger screens. You could turn the question around and ask why anyone would want to surf the web on a 480x320 screen instead of 800x480.
All that said, I think there's plenty of market share available for all sorts of different device sizes and capabilities.