by book reader has a network connection, but most of the time I have it turned off because it gives me so much more battery life.
all these extra layers will work find if you are on a high-powered mains powered system connected to a high-speed, low-latency network connection. but change any of these criteria and the feasability of 'everything is the web' starts falling apart rapidly.
OLPC and the netbooks pointed out to people that there is a backside to moors law, namely the same capability gets cheaper over time. today a few people are willing to pay large sums of money for smartphones. when the same capability that sells today for $600 drops to $100 there will be a _LOT_ more of them around.
if you are on a high-latency network connection (say a satellite feed if you are in rural areas) every round trip to the server is very painful (approximately 1 second)
I already mentioned the battery life issue, radios are expensive to power (and as the power for the rest of the system drops over time, they become even more expensive as a relative cost).