I agree. $499 is a deal-breaker for me. I will happily wait for Apple's device now.
But you must admit that presenting "let's make it for $199" as a valuable idea is annoying. It's like those 'think outside the box' speakers that present Apple's "idea" as "Let's make a computer that isn't as big as a fridge and is cheap enough to be bought by normal people." There's an Ali G presents to Donald Trump aspect to it.
But $499.00 for a product from an unknown entity like Fusion Garage? eh. from what I've seen of them so far, they don't have Apple's flair for design. So now it's more of a stretch. They'll get some sales from gadget-happy early adopters, but it's going to take a whole lot of feel-good word-of-mouth reporting in the blogosphere before it will hit the mainstream.
Microsoft's Courier looks game changing, especially compared to their current Tablet PC offerings. Very slick looking, albeit vaporware at the moment. I'd imagine Apple would have to be just as amazing, though possibly in a different direction than the student/business note-taking market Microsoft is targeting. Microsoft seems to be in a very niched market here.