I attempted to get Sugar running on a computer lab I was teaching in at the time, and it was a fantastic idea, but had enough bugs for it to be effectively unusable.
> would prepare 3rd world kids for exactly no other computer
The point wasn't to teach them how to use computers, otherwise they would have just shipped a Windows device. The point was to make an educational tool; even using it as an ebook reader is a big thing in places where there are no textbooks.