No, they’ll never have the computing power, or storage capacity to compete with desktops or laptops. Because everytime technology advances that will help the Pads catchup it will also help the full sized machines stay ahead. That’s always the problem small form factors have in competing with large form factors, there’s all kinds of neat stuff out there (like Seagate’s 3TB HDD) that won’t fit in the smalls, and everything cool that will fit in the smalls will also fit in the bigs. If somebody invents 3TB flash storage you can use in a Pad you could probably put 300 of them on a PCI card and have PETABYTE flash storage for a desktop. Small form factor items will never have more than about 30% of the power and storage of large form factor items.
The screensize is fine for portability, but for usage it’s crap. If you’re going to spend 40 hours a week doing real work with a computer, which often times involves multiple application and multiple items within the same application, you can’t do that on a screen the size of a trade paperback. At work people hook up two and three 17 inch monitors. At home I’ve got a 27 inch monitor. Sure they’re not portable, but real work generally isn’t.
The keyboard in the pants is pure silliness. It won’t develop over time because there’s no reason for it, those things just exist as an alpha nerd fashion accessory. And carrying around a real keyboard to plug into the pads defeats the portability. If you’re going to carry around a tiny screen and a full sized keyboard you might as well split the difference with a laptop, the keyboard is smaller but still a good size, and the screen is bigger, and you get more RAM and and processor and drive space.
Pads are neat, but it’s important to understand what they are. They’re e-readers with web browsers. That’s basically it. Don’t take my work for it, even Jobs basically says that.
I get along fine with my 17" widescreen laptop, but a big limiting factor of touch-only tablets isn't just screen size (which is small), but also the fact the keyboard takes up a LOT of the real estate of the screen when it's up. AND your fingers obscure more when using it - they block more of the view. It's the biggest issue I've found with my own Android tablet, and when using an iPad. You lose a LOT of screen real-estate any time that keyboard is active.
Yes, you can use a Bluetooth keyboard, but that's another thing to carry around. And then you're right at the point where a netbook becomes even more attractive - it doesn't take much more to open up and boot a netbook than to boot a tablet, pull out a keyboard, and get it going.