I also agree that for $500 there are better offers on the market than netbooks, but that's just because companies are trying to fill their pockets. A 9" netbook should be sold for 299 max. That's how they where created, formed and got popular!
In fact the first popular device,the OLPC, had a 8,9" screen, was aimed to cost $100, but ended up costing $200.
The screen as widescreen as possible could reduce the overall size just like the Sony Vaio P series, a screen that's the size of the keyboard.
With a 1x1 screen you'll end up with a square and a whole lot of unused space on top and below the keyboard.
The best netbook is actually the keyboard with a screen