don't understand why the netbooks never caught on... they're amazingly adorable, yet fully functional...
Underpowered and sucky, and while yes, put a minimal Linux build on it, the people they mostly appealed to were people like my mom who can't even figure out how to get her computer connected to the internet without my help, much less install and learn a new operating system.
And for a lot of people the point of a portable device IS media and gaming to keep them entertained, which netbooks as you've stated can't pull off. Nor are they suited to actual work, due to the ludicrously small size of their keyboard. My mother had a netbook and I hated it, and for that matter she does too.
They were quite rightly replaced by superior devices that lacked their flaws. Ultrabooks have taken over the small light form factor thing, but with far better specs for doing actual work. Still aren't great generally for gaming but IMO laptops never have been, not even gaming laptops. Smartphones and tablets fill in the casual computing/streaming/etc market and are accessible to the same group of people who went for netbooks because of their somewhat cheaper price.
It does sort of still exist in the form of things like the Chromebook, but it was an awkward device that was around at an awkward time and didn't do a very good job most of the time.
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On the original topic, aww, it's cute. This is even cuter though:
http://www.ebay.com/itm/400615696259?_trksid=p2055119.m1438.l2649&ssPageName=STRK%3AMEBIDX%3AIT
