Personally I look at the Acer Aspire One lineup and feel the same way... too much product for the demand out there. Almost 28 different models?!
There should be at most three, with the last one being optional:
-- Ultraportable (8.9-9.9 inch display/base) with two USB plugs, NIC, Wi-Fi ABG, Card reader (SD/MMC and Memory Stick by default) and SSD Hard drive.
-- Backpacker (10-11 inch) with a sturdy base and solid enough construction to make a good fit in a school backpack (provided the kid has enough good sense not to drop the backpack in the first place), more USB ports, bigger resolution.
-- Enthusiast (11-12 inch, no larger than 12) with a faster processor and cheap dedicated graphics output (okay, mine basically... but I can play a MMORPG away from home at 20fps for $400... not bad considering I couldn't do that before without a netbook/laptop at all.)
Price shouldn't exceed a 12 inch or better machine, otherwise, there's no point to making the netbook. $500 should be the cap. (ASUS N10, though I like the video card provided, is not a netbook for $600: for the same price, you can get a comparable laptop that's 16" and a much better processor/FSB operating for you at the cost of "it's not small".) Portability doesn't justify weaker hardware if the price is same as something else. Netbooks fulfill the lower end, therefore they're useful.
As for utility, the netbook isn't for everyone. If you can't imagine a use for it, or can't tolerate lower-spec machines when a better one is $120-200 away, damn the fad and don't get one. But I don't see them going away, either. A tiny, dispensible laptop for field work, IT network analysis, inventory (when more data is needed than a Pocket PC or 2-line LCD terminal is needed), field research or data collection, troubled author who wants a cheap typing pad for inspiration... there's countless uses if there's more focused development made and not just a focus on "consumer wants a pink netbook for 12-year-old daughter". (Girl geeks need PC's too, not knocking that...) Personalization and squabbles over which low-cost machine is better isn't the questions to answer in the long run... It's a single-tasker... and if you don't like black or white, that's why God made stickers.
Culling the herd doesn't have to mean the farm is shutting down, maybe there's better cattle to be had later by getting rid of some competition?