However, $20 cell phones are all over the developing world. They aren't capable of doing a lot of the things that would be useful in education. But how much might it cost to upgrade them instead of creating a whole new creature.
Smart phones seem to do most of what a teacher would want for the class. Probably more.
Were one to shrink the memory some, make it a 1.5 pixel camera instead of five, and use a keyboard only instead of a touch screen, and a few other cost reduction measures, one could be within spitting distance of the $100 computer. Follow display and memory costs down the cost curve in 2011 and 2012 and I'm guessing that one would not even have to spit very far.
Volume is also a big factor. Here the third world model could piggyback of the sort of volumes that smartphones are enjoying.
We need to break the paradigm of phone vs computer and realize that what we have are less capable computers and more capable computers. All networked via LAN, WiFi, or cell signal.