OQO have released an upgraded 02 version of their "Pocketable" computer . This is a 5.6 by 3.3 inch device with a slide out keyboard and 800 x 480 pixel 5-inch touch-screen. It is around the size I proposed for a low cost educational computer. But this is a high end unit costing around $US1500 (same price as the current 01 model). It has a low power 1.5 GHz VIA processor.
The OQO units have a transflective screen, which is designed to be read in daylight with the back light turned off. Perhaps screens for these units which have been rejected due to dead pixels could be recycled for low cost computers. If the dead pixels are at the edges of the screen, the display could be masked and used as a 640 x 480 display.