Keep in mind, it's pretty pointless to compare MHz across completely different CPU architectures. A 1GHz ARM core and a 1GHz x86 are not going to be anything alike. Another difference is that the OMAP3 is a complete System-on-a-Chip design: you get your CPU core, your graphics, and your device interfaces all in the same real estate. With the Atom you have the CPU, a separate memory controller, and a separate graphics unit. The ARM-based design is geared for low temperatures and much lower power consumption, which is why it's a standard choice for smartphones (which Intel's Atom hasn't been able to penetrate yet due to its power and heat differences). All that is something to consider when talking about the price of this versus the price of an Atom netbook.
The choice of the OMAP is probably so that there's less effort involved in porting Android. Right now the x86 version is still very much an alpha.
That said, I do think "under $500," which I assume is somewhere around $499, is a little too expensive for a device like this.