I agree, Linux is not a free lunch as it is often portrayed.
But, for a device manufacturer there is probably more flexibility licensing a Linux distribution in some ways compared to PocketPC and PalmOS.
No required hardware specs (i.e - PocketPC) and with Linux you get the source code, which you can modify as you need.
Linux distributions have fewer political implications compared to either Palm or PocketPC, and are less able to "punish" licensees for not "towing the company line."
Linux is still a bit immature for most consumer devices, but that's changing (see
http://www.eetuk.com/bus/news/OEG20030701S0010)
PalmOS and PocketPC are clearly the obvious choice for the generalized, commodity market, because the applications and consumers are already there.
But for products which have a specialized purpose or niche and taking advantage of those pre-existing applications is not a priority, I do not see a clear advantage to choosing Palm or PocketPC.
In the case of this device however, I do not see a compelling reason to choose Linux, unless using Linux is the specific need. I do like the idea of a folder-type form factor. But, from the specs, this thing seems like a step back from the Zaurus offerings. I'd rather have the Sharp SL-C760, although not at $800.
I do wonder why Linux is not used on mobile phones.