Came across the Raspberry Pi the other day. Find it intriguing, especially as my early computing experiences include soldering together my very own Sinclair ZX80.

Not out yet so this is all theoretical, but already started trying to re-prioritise my computing requirements: perhaps use the Raspberry to drive browser & email, tablet to do a few more photo/video bits and relegate the PC to be a file server?

Are you sure you want to use a tablet for photo video 'bits'? For real productivity a desk and/or workspace is important.

As for the Rasberry Pi I believe it to be a niche product, they had a video of it running 1080p@20fps or some such but in reality who's going to make use of it? It's not very fast as is and is heavily limited since it will only run Linux until Windows 8 ARM edition comes out.

XBMC has been seen running on this.

Only the closed-minded should make generalizations about the effectiveness of this machine until they've been used in the wild, so I'll hold off doing so until I've played with one for a while.

Lack of S/PDIF is a serious flaw imo. Hoping for a version with that feature.

Heavily limited by ONLY running Linux? There are other OS's that will run on ARM but Linux remains the obvious choice. Linux has so many advantages over Windows when running on a small platform like this that I don't think you'd really want to consider Windows for such a thing. A well setup Linux base would allow this to be used as the base for a lot of things. Gettign a good distro base would be key. Gentoo would be a good choice for tuning to the platform and a Portage Overlay with all the binaries as well as source would be ideal to prevent taking 3 days to rebuild everything after any upgrade!

I do wonder if Raspberry Pi would be open to commercial partners? It could find use embedded into appliances.

I agree. Linux with a Window Manager would be fine for most needs (Email, webbrowsing, some media playback). For heavy duty stuff you can always fire up an old desktop PC with more horsepower.

Some things to take into account when choosing a linux distro for the Raspberry Pi:
1.) the CPU is ARMv6 with VFP (hardware floating point).
Debian supports ARMv4+ with software floating point (= slow when float is required), or the new armhf arch for ARMv7+ with VFP. Unfortunately this means that you're forced to use the old armel arch with software float when using Debian on the Raspberry Pi. Ubuntu is restricted to ARMv7+ with their current distribution afaik. The only distribution I've heard that will support ARMv6 with VFP is Fedora. So to get maximum speed (without recompiling) you'll need to run Fedora or another distribution that will be precompiled for ARMv6 with VFP support.
2.) 256MB RAM means you need to use a real light-weight windowing manager. Think of LXDE, XFCE, Fluxbox, etc.
Xubuntu/Lubuntu are often quoted as examples of how XFCE and LXDE should NOT be implemented because of all the included bloatware in these Ubuntu variations. A good XFCE or LXDE system easily can get below the 100MB RAM mark on startup from what I've read on forums.

You will also need to carefully chose your programs to match the limited RAM. I suppose proper comparisons will pop up when Raspberry Pi grows a wide and established install base.

Arch Linux supports ARMv5 and would otherwise make a perfect choice if ARMv6 VFP was available. I hadn't considered the different ARM versions so much before but looking at it again maybe Gentoo would slightly miss the point. If distros are going to be available for ARMv6 VFP then there is no way you can compile more specifically and short of cross-compiling, you won't want to recompile everything on such a low power system.

I have run XFCE very well on an old laptop with 256Mb RAM even when 16Mb is shared for video memory. No reason this can't be pushed a little more too. Maybe a media centre setup with MythTV would be possible? MythTV is pretty much it's own desktop environment so could be run from a totally spartan xterm xorg session. There should be enough hardware decoding support to get something playing, even if it isn't at 1920x1080.

you can easily hook up a cheap USB soundcard with SPDIF in/out. For analogue you'd want to do that anyway as build-in audio likely is rubbish.

Sure, but it defeats the purpose a little bit. Would like to have it cheap, compact and very low power. But I'm sure more of these things will follow.