I believe it is possible to start with a metaphor that everyone educated enough to want to use a computer understands: a book (my 1.5-year-old daughter qualifies: she would love to push the buttons on my laptop keyboard, were it allowed; she also loves to look at (picture) books). XO 2 is the right step in that direction: see http://blogs.pcworld.com/staffblog/archives/006986.html for details. Once the hardware is in place, the software is a great opportunity for entrepreneurs to design and build.

I think the problem with 'simpler' computers is similar to the problem with WYSIWYG development and database platforms: they are too simple for anyone whose job or interest it is to create a webpage or database and too complex for the ocassional user. This is why MySpace took off where all the many DIY webpage creation tools did not. MySpace redefined the goal with tools that leveraged the hidden desires of people to have a webpage. In the case of MySpace is was to socialize. Most people don't think of MySpace and Facebook as a web development tool but if you look at what the end result is, you'll see that people are creating online content using these social networks.

So the problem of "simpler browsers" will likely only be solved by solutions that redefine the experience and goal and it will likely be very close to what we now call a smartphone.

They don't, nor do they have to. In fact, they generally don't have any idea of what to expect from a simpler computer, other than "it's not frustrating".

For those of us that are computer literate, it's hard to imagine that even basic abstract concepts like email are completely foreign to the majority of the population. I would guess that over half of people don't know how to answer the question, "what do you use for a web browser?".

So you have a blank slate, a free pass to design anything you can imagine. If you can deliver it to these people, and if they don't find it intimidating, or hard to learn, or unpredictable, then they'll like it.