The form factor.
It's good for movies yeah? So I hear - but spending 2.5 hours with my arms in front of me like a I'm driving a car doesn't sound like fun. I only have two hands and I want them BOTH available whilst I'm watching a film (to eat/drink/smoke/masturbate).
Touch screens are great for small and large devices - small devices like a phone, large devices like a blackboard or screen for presentations.
When I first saw the iPad, I thought it looked rubbish because the plastic surround was so big - then I realised, "how else can you hold it with one hand?!".
The only thing I'd want this device for, is an e-reader, and my Kindle does a better job. I can turn the pages with one hand, the battery lasts for months at a time, I don't have an annual contract and can use it anywhere in the world with cell phone reception, it's easy to read, works great outside in sunlight, and I get my newpapers delivered to it every morning. It doesn't have nice page-turn animations like in the iPad advert (the guy turns 10 pages in 2 seconds...who really does that!?), but in reality I don't care about how "realistic" the page turn animations are - page turning is less than 1% of a reading experience. The rest is, well, reading!
It may very well work for games - although I have my money on Project Natal at the moment for that....