I had thought the same thing, but until you actual see and try one of these eee PC's, you have no idea how much more portable they are, even than a 13" laptop.
This sums it up perfectly.
As an example here: I had just gotten a new wireless router, and was trying to optimize the signal strength for some of the other laptops in the house. I simply logged into my router's configuration page from the EeePC, and then monitored the signal strength on all wireless clients as I re-oriented the antennas to provide the best reception. Considering the cramped spaces of my networking "closet" the EeePC proved to be very useful here.
Another case was when I just had to check some information online quickly. Rather than pull out a big laptop and wait a minute for it to boot up, I simply logged in with the EeePC in about 20 seconds (from a fully-powered down state). It was just convenient for me (and this kind of task really doesn't need a Core 2 Duo processor to do).
For me, it's the little things like this that have made my purchase of the EeePC worth it. Before I had seen one in person though, I felt the same way as David did. The truth is, you cannot directly compare this on price alone -- portability plays a huge role. If you want an ultra-portable notebook (that would still be bigger than the EeePC), you'll pay a premium for it.
That said, the EeePC is not for everybody. If you need maximum performance, the EeePC is certainly not the computer for you.
Oh, and for those who don't care for Linux and think that the machine would be underpowered to run Windows XP, I have a solution: install Windows 2000 on it. That's what I have on there now, and it's extremely fast (not surprising, since Windows 2000 "recommends" a 366MHz CPU and 96-128MB of RAM).